by Ruth Montiel:
Could the Euro split into two or more currencies? Could it dissolve altogether? What is the extent to which countries should have flexibility to enter and exit the European Union to improve their economies? On Thursday, November 4, Wolfgang Proissl, a Yale World Fellow from Germany who served formerly as the Brussels bureau chief for the Financial Times Deutschland, addressed these and more questions as he discussed the causes and ramifications of the Greek financial crisis of 2009.
Proissl roots the crisis in the adoption of the Euro by 22 of the European Union countries and the failures of the rules of the European Central Bank. Although countries were supposed to keep their deficits to 3%, in October of 2009 the new socialist government of Greece announced that their deficit had climbed to a level far surpassing this, to 9% or 10%. Other member states were forced to provide a 110 billion Euro bailout that left Greece able to refrain from market participation for three years to rebuild its economy.
One of Proissl’s central points was the tension that the crisis caused in other member states, most notably Germany: “The Germans had very reluctantly given up their national currency,” Proissl explained. “They agreed to do so only after promises that the other Euro states would keep their economic houses in order and no German taxpayer would ever be forced to bail out other Euro countries.” Germany suffered greatly as a Eurozone state as the world economy slowed.
Germany ultimately requested that Greece be expelled from the EU. However, as Proissl said, there are no provisions in the EU rulebook for the exit of states. This was only one of many suggested resolutions to the problem. Although Proissl himself does not believe that the dissolution of the Euro or its fracturing into multiple currencies is likely, he acknowledged its possibility as the EU struggles to reconcile the distrust and frustration of countries like Germany with the wide variety of economic climates in Euro member states. Currently Greece is undergoing significant structural changes under the socialist government to lessen the deficit and begin to repay the bailout, but concern over other small states with weaker economies remains.
This crisis illuminated the issues in EU politics, European integration, and the ultimate fragility of Europe. Now, Proissl explained, the central goal is the avoidance of such a crisis in the future, “There is currently work going on within the EU to tighten the control over the Euro states economic policies in order to prevent situations like in Greece from arising in the future.”
Ruth Montiel ’13 is a Political Science major in Trumbull College. Contact her at ruth.montiel@yale.edu.