European Union policy of saving the euro at all costs should be enough to secure the currency area's survival but this complex endeavour has hurt the eurozone's economic competitiveness and is chipping away at European solidarity, writes Hans-Olaf Henkel, Economics Professor at Mannheim University.
Henkel argues that it was the 1992 European single market – not the arrival of the euro seven years later – that brought an era of "free trade, increased competitiveness, and new wealth to Europe."
He claims that subsidiarity and competition, once driving forces of European economies, have been muted by a push for ever-greater centralization and harmonization.
And as economic conditions have deteriorated all across the eurozone's south since the sovereign debt crisis appeared in 2009, hostility towards Brussels – and towards German-led austerity – has increased.
With youth unemployment over 30% and 50% in Italy and Greece, respectively, anti-EU politicians have found growing support.
Even German-French relations, the cornerstone of the European Union, are at "their lowest point in decades."
Reflecting on the currency area today, it's difficult not to see the project as Henkel describes it: "a nightmare, plagued by recession, record-high unemployment, social unrest, and rising distrust among member states."
The crisis in Europe has been for over three years the darkest cloud hanging over an increasingly interconnected global economy, affecting everything from stability of international financial markets to corporate cash hoarding that stems from weak business confidence.
The key to escaping this crisis, writes Henkel, is for Europe’s leaders to "stop treating the eurozone as a homogeneous entity, imposing one-size-fits-all policies on vastly different countries…the euro’s framework should be adjusted to suit current fiscal and economic realities – not the other way around."
Sources: Project Syndicate; Harvard Law School; The CBC; Bruce Bartlett, writing for the New York Times
Photo credit: S. Solberg J.