ATHENS – When the eurozone was established, its creators envisioned gradual progress toward an “optimal currency area,” characterized by fiscal integration, the free movement of labor, and political union. But this process has not occurred, and, as the interminable Greek crisis has shown, the eurozone remains rife with structural weaknesses and extremely vulnerable to internal shocks. This is clearly not sustainable.
Despite efforts to promote fiscal-policy coordination, eurozone members’ budgets still fall under the purview of separate national authorities, and northern Europeans continue to oppose transfers from more to less prosperous countries beyond the very limited allowance of the European Union’s regional funds. Moreover, labor mobility is severely constrained by linguistic and cultural barriers, as well as administrative bottlenecks. And “ever-closer” political union has ceased to attract public support – if it ever did – and is thus not feasible today.
A growing number of commentators – and no longer only in the Anglo-Saxon world – question the monetary union’s viability. Some encourage Greece to exit the eurozone, believing that a more restricted and homogeneous currency union would be stronger and easier to unite. Others consider a Greek exit to be just the start of the inevitable unraveling of a scheme that does not serve the purpose for which it was created.
The eurozone has so far managed to prove the doomsayers wrong. By sheer force of political will, compromise after compromise has been reached, thereby sustaining a historic project that is not, in its current state, sustainable.