Thursday, February 11, 2016


Daniel Gros

Is some form of common European economic government inevitable? Is enlargement of the eurozone still on the cards, or will the number of countries using the euro remain static – or perhaps even contract? Can the European Union ever resolve its internal economic imbalances? Are some banks not only too big, but also too interconnected, to fail?

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.

Read More Read Less

Commentaries available in 12 Languages

Recent commentaries

Euro coins
Economics 19

The Negative Rates Club

After years of quantitative easing and negative interest rates, it is becoming clear that these policies work as expected only in debtor economies, but have little effect in creditor economies. The re… read more

World Affairs 33

Schengen and European Security

In light of Europe's refugee crisis, not to mention last month's terrorist attacks in Paris, the core principle of a "Europe without borders" has come under attack. But, contrary to popular belief, re… read more

Euro bills.
Economics 15

The Eurozone’s Minsky Conundrum

Stubbornly low inflation has the European Central Bank worried. But its response – buying even more bonds and lowering its benchmark interest rate even further into negative territory – could backfire… read more

Graffiti in Berlin, Germany
Economics 15

The End of German Hegemony

Without anyone quite noticing, Europe’s internal balance of power has been shifting. Germany’s dominant position, which has seemed absolute since the 2008 financial crisis, is gradually weakening – wi… read more

13 pages