What does the future hold for the Euro in these turbulent economic times?
Ted Malloch, a man once tipped to be Donald Trump’s ambassador to the European Union, announced the Euro “could collapse” in the next 18 months. Nineteen of the EU’s 28 member states now use the currency. It faces heavy criticism across Europe, but is the Euro doomed to fail?
Europe has shown robust economic growth in recent months. Consumer confidence has improved, a key indicator of peoples’ optimism. According to a recent European Commission report, the EU continues to grow steadily. According to a report by Markit Economics, the manufacturing sector has been at its healthiest since 2011, largely due to increasing demand. Unemployment is also falling – last year ended with the lowest unemployment rate since 2009.
Some say the decline of the Eurozone is inevitable. Critics claim the EU is losing support because a single currency cannot work over a region with such enormous economic and political diversity.
This argument is wrong. Firstly, it fails to recognise the necessary challenges of economic union. For example, last year Scotland’s growth was a third of the overall UK figure. Recent GDP figures show much slower GDP growth for Scotland than the UK as a whole. This decline was a result of the 2015 oil price crash, showing the severe weakness of a Scottish economy so dependent on fossil fuel exports. The oil and gas industry provides jobs for 200,000 people – 10% of total employment – yet is entirely dependent on prices which vary according to the whims of OPEC. In 2015 alone, oil prices varied between $28 and $63 per barrel. Scotland now has a higher deficit than Greece (at 7.2%). Those criticising the Eurozone must first look domestically to understand the necessary challenges of economic union.
Second, many concerns over the strength of the Eurozone have been wrongly based on observing the rise in Euroscepticism across the EU. There has indeed been a rise in Euroscepticism – according to the Pew Research Centre just 51% across 10 EU countries surveyed viewed the EU favourably. But Euroscepticism does not equal hostility towards the Euro. In fact, a Eurobarometer survey suggests overall support for the euro has risen in the EU, with the percentage who see euro as ‘good for their own country’ reaching an unprecedented new high at over 61%.
There is still hope for the Euro. Europe’s economy continues to grow and there is still majority support for the single currency. But significant challenges exist. If we are to plan for, and accurately understand the dangers of the future of the Euro, Europe must be understood in the context of current domestic challenges of monetary union, those which the lesson of Scotland helps to show.
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