By Daniel J. McLaughlin
Happy birthday, euro! Bon anniversaire! Alles Gute zum Geburtstag! Feliz cumpleaños! On January 1, the single currency turned 20 years of age. In 1999, the euro was launched, but it would be another three years before the physical currency - the notes and coins - was initially used in 19 European Union countries. It would add another seven countries to the eurozone.
It was originally meant to be adopted by all EU member states, but there are nine countries who have either not met the criteria to switch to the currency (set out by the Maastricht Treaty), or simply chose to stick with their own. They are: Bulgaria, Croatia, the Czech Republic, Denmark, Hungary, Poland, Romania, Sweden and the United Kingdom. Britain, of course, will be leaving the bloc on March 29.
Should we be getting the bunting out for the euro? Is it time to cut the birthday cake? Is 20 years of the eurozone a cause for celebration, or two decades worth of misery?
If you ask citizens from countries in the eurozone, they have a largely positive feeling about the euro. Polls have consistently found strong support for the single currency. A poll from Eurobarometer found it to be at an all-time high, with 63 per cent of respondents agreeing that the euro is "a good thing for your country". Even in Greece and Italy, with perhaps negative experiences of the eurozone, their support is around the 60 per cent mark.
While the public support may be strong, it does not reflect economic or policy success, according to the Economist. Eurozone countries are stripped of their independent monetary policies and the ability to devalue their exchange rates.
Italy, for instance, has seen its living standards barely rise since 1999. And, while Spain is experiencing recent decent growth, it's been a long journey - and their youth unemployment rate is 35 per cent.
"The euro's history is littered with errors by technocrats," the Economist argues, "The worst was to fail to recognise quickly in 2010 that Greece's debts were unpayable and that its bondholders would have to bear losses. Greece has endured a prolonged depression and its economy is almost a quarter smaller than it was a decade ago."
According to the Washington Post, the best that can be said about the euro on its birthday is that it has survived. Otherwise, it has failed to achieve its central goals: increasing economic growth and strengthen public support for European political institutions. It was hoped that it would force poorer EU countries to improve their economies; whilst having the safety blanket of having wealthier members bailing them out, if they get in trouble.
In its first few years, countries in the eurozone were optimistic, on the verge of naïveté. "The trouble was that the creditors overlent and the debtors overborrowed," the Post writes. When the Great Recession between 2007 and 2009 hit, it hit hard. The creditors were unwilling to lend or renew their loans, leaving the debtors without money - either trying to get credit elsewhere, or imposing cuts whilst raising taxes.
In large, the euro has proven to be a disappointment. Regional annual gross domestic product (GDP) peaked at 4.6 per cent in the first quarter of 2000, and it has never broken above four per cent since. Forbes argues that the principle that was meant to underpin the euro - the Stability and Growth Pact - has been "cut to ribbons". The pact required no national budget deficit over three per cent of GDP and no national level of debt to GDP over 60 per cent.
All you have to do is consider the leading four economies of the eurozone on these measures:
Germany: +1.3 per cent (budget deficit) and 64.1 per cent (national level of debt)
France: -2.6 per cent (budget deficit) and 97 per cent (national level of debt)
Italy: -2.3 per cent (budget deficit) and 131.8 per cent (national level of debt)
Spain: -3.1 per cent (budget deficit) and 98.3 per cent (national level of debt)
The euro was meant to challenge the dollar, but it is "spluttering along" when you measure the eurozone and the United States' GDP growth and unemployment rates. The eurozone's GDP is +1.6 per cent and the US' GDP is +3.0 per cent, whilst their unemployment rates are 8.1 per cent and 3.9 per cent respectively.
The euro needs a big improvement if it wants to continue its journey. Its first two decades have hardly been a huge success. It may have survived one financial crisis, but another could truly challenge the single currency.