Europe’s Monetary Union Is Still Unfinished Work
The euro was a bold creation, but it won’t succeed without further reform.
It’s come a long way, but not far enough.
Photographer: Daniel Roland/AFP/Getty Images
Leaders of the European Union meet in Brussels this week to discuss the future of the euro zone. In recent years, governments have strengthened the system a lot, making it less likely that a crisis in one member state would jeopardize the currency area as a whole. Even so, they haven’t done enough.
Today the euro zone is much more robust than it was at the start of the Greek sovereign-debt crisis. There’s a rescue fund (the European Stability Mechanism); a tried-and-tested central bank equipped with new tools; and the beginnings of a so-called banking union. All this is valuable, but it falls short in two main ways. First, the banking union needs to be completed. Second, lacking the adjustment mechanism provided by individual exchange rates, the euro zone needs better ways to absorb economic shocks.