For the first ten years of its existence, the euro went from strength to strength, eliminating exchange-rate risk and reducing transaction costs for entire economies. Then the global financial crisis struck, reawakening worries about the imbalances that had built up inside the eurozone, with Germany’s huge current-account surplus matched by large deficits elsewhere – particularly in the Mediterranean countries that German policymakers had been so keen to exclude from the common currency.

That crisis was, by far, the biggest test that the euro has faced. It reawakened questions, dormant since the euro’s earliest days, about whether a disparate a group of countries could share the same currency and monetary policy. More important for the Union’s long term viability, perhaps, is the question of whether or not the eurozone’s member states will ever agree to the greater political union that a multinational currency area appears to require in order to function properly.

Daniel Gros, Director of the Centre for European Policy Studies (CEPS) in Brussels, has been intimately engaged with developing the ideas that have spurred Europe’s economic unification. He has served as an economic adviser to the European Commission, the European Parliament, as well as the Prime Minister and Finance Minister of France. One of Europe’s top economists, Daniel Gros is editor of Economie Internationale and International Finance.

Every month in Euronomics, written exclusively for Project Syndicate, Daniel Gros illuminates the cutting-edge ideas – many of them his own – that drive public debate about Europe’s future.

For the first ten years of its existence, the euro went from strength to strength, eliminating exchange-rate risk and reducing transaction costs for entire economies. Then the global financial crisis struck, reawakening worries about the imbalances that had built up inside the eurozone, with Germany’s huge current-account surplus matched by large deficits elsewhere – particularly in the Mediterranean countries that German policymakers had been so keen to exclude from the common currency.

That crisis was, by far, the biggest test that the euro has faced. It reawakened questions, dormant since the euro’s earliest days, about whether a disparate a group of countries could share the same currency and monetary policy. More important for the Union’s long term viability, perhaps, is the question of whether or not the eurozone’s member states will ever agree to the greater political union that a multinational currency area appears to require in order to function properly.

Daniel Gros, Director of the Centre for European Policy Studies (CEPS) in Brussels, has been intimately engaged with developing the ideas that have spurred Europe’s economic unification. He has served as an economic adviser to the European Commission, the European Parliament, as well as the Prime Minister and Finance Minister of France. One of Europe’s top economists, Daniel Gros is editor of Economie Internationale and International Finance.

Every month in Euronomics, written exclusively for Project Syndicate, Daniel Gros illuminates the cutting-edge ideas – many of them his own – that drive public debate about Europe’s future.