There have been rumors in recent days of a “core Euro”. This is the scenario in which we essentially break off into two Euros – a north and south Euro. But would this really fix the problems? No. Joe Weisenthal at Business Insider nails this one. He lists the 5 reasons why rumors of a “core Euro” won’t actually fix Europe:
- The value of the “core euro” would surge, rendering it uncompetitive and prohibitive for Germany’s export machine.
- Even in the union of a few countries, you’d still have the problem of the fact that no one country has currency sovereignty… they’d still potentially be able to run out of money. Just imagine if a French bank got wobbly, and everyone rushed their money into German banks, France would be up a creek.
- You’d slowly develop trade imbalances that countries wouldn’t be able to fix through the natural means of currency devaluation.
- You’d still have one central bank trying to manage monetary policy for multiple economies which, at times, will be moving in different speeds.
- You’d still have cultural integration problems: Are the French and German really going to be part of the same country?