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Didn't the whole Greece debt situation show why that could be a problem? One country's debt crisis caused the euro to tank 30% in a very short time. It ended up
by ApolloFortyNine 7y ago
Didn't the whole Greece debt situation show why that could be a problem? One country's debt crisis caused the euro to tank 30% in a very short time. It ended up rebounding, but pretty much forced the EU to handle the situation (write off debt and provide low interest loans for the rest) or risk the whole thing exploding.
It seems like your betting on 5-10 countries not failing, when with most currencies you just have to deal with 1.
Which is probably why it's not currently the reserve currency, one would assume.
- baybal2 7y agoGreece was fiasco for Euro. It's a lesson learned now, and ECB will hold binge spenders on a leash. UK can leave EU, Greece or Eastern Europe can not.
- stephen_g 7y agoIt’s more that the Euro has been a fiasco for Greece, Italy, Portugal and Spain... It’s fundamentally problematic to have a single exchange rate between countries with different inflation rates, balances of trade, etc. - because you can’t have an exchange rate that works for everyone and the value can’t move between the other economies to balance out the differences. The only way around that (apart from going to separate currencies with floating exchange rates) is to have some kind of fiscal balancing method. In the US, for example, federal taxing and spending tends to do this between the states. But that is probably politically impossible in the EU (redistribution from richer countries to poorer is pretty unpopular).
- baybal2 7y agoVery easy to do, and that's actually what ECB is now doing as I understood. They now enforce the limit of how much debt a country can sell, and at what terms much more rigorously