SJS4- The Euro's Never-Ending Crisis

Source: Eichengreen, Barry. “The Euro’s Never-Ending Crisis.” Current History, vol. 110, no. 734, Mar. 2011, pp. 91-96. 

Author's Credentials: Barry Eichengreen, the author of "The Euro's Never-Ending Crisis", is an economist, author, and professor at the University of California, Berkeley. He specializes in globalization and thoroughly describes the euro crisis in his novel "The European Economy Since 1945" and in his novel "Capital Flows and Crises." He graduated from Yale University and was a senior policy advisor to the International Monetary Fund in 1997 and 1998.

Summary: In summation, the author believes that the EU has created an impossible situation. To begin, the idea of implementing the euro was very profound and beneficial, at first, due to it's equality across Europe and the improved investment opportunities. The author also touches on the fact that former "book-keeping" errors and exchange problems are now resolved due to the general currency. However, the author then addresses the problems formed through this idea. Greece and Ireland are the two primary countries that have experienced hardship with the new currency. When the currency was switched, Greece went through economic hardships which caused the lack of investment in Greece's banking system and merchandise which, in turn, caused Greece to go into debt. Greece then began to borrow money from European countries and then the EU. Ireland was also addressed throughout the article. The change in currency illustrated to Ireland's banking systems their large budget deficit which they found themselves in need of filling. Instead of borrowing money from other countries, like Greece had, they tried to draw from their depositors which caused the depositors to be frightened for their own financial situations and so to withdraw their money. This caused Ireland to be in a desperate financial situation and to raise taxes in order to pay off their debt. Near the end of the article the author describes how the EU had created an impossible situation through creating the euro. The EU recognizes that it is impossible for a country to pay back the debt that it owes in full, which creates the question of whether countries in Europe should be more like Greece and borrow freely from systems such as the ESM, or whether they should be more like Ireland and try to get out of their financial situation on their own. Both scenarios will cause problems either presently or in the future which causes the future need for great discernment.

Analysis: The author creates a very valid argument, one that many had not considered in the past. Not only does the change to the euro surface unacknowledged problems, but it also creates the need for decision making. The author provides impressive evidence in addition to the acknowledgement of former fiscal problems such as those in Greece and Ireland. On top of that, the author illustrates his own opinion throughout the article and makes a clear case on top of that provided in factual evidence of Greece and Ireland. This source is very credible based on the accuracy of the information presented and the thorough background that Berry Eichengreen has in this field.