The euro: a failed experiment with lasting damage

When the euro was launched at the turn of the millennium, it was hailed as a great leap toward European unity. A single currency for a single market, built on promises of stability, growth, and integration. Yet more than two decades later, the euro has failed to deliver on nearly every one of its promises. Instead of uniting Europe, it has deepened inequalities, destroyed economic sovereignty, and trapped weaker economies in a monetary system that favors the strong. The euro has not brought prosperity or cohesion but stagnation, instability, and division.

The political origins of the euro

The idea of a common European currency arose out of postwar integration efforts. The Maastricht Treaty (1992) formalized the transition toward Economic and Monetary Union (EMU), committing member states to rigid fiscal and monetary convergence criteria.

Yet the project was political in nature. As economist Paul Krugman stated, the euro was “a currency without a country” (title The Return of Depression Economics, Paul Krugman). It fused economies with different productivity levels, labor structures, and business cycles into a single monetary system controlled by the European Central Bank.

A one-way street

Once adopted, the euro could not be abandoned without triggering a full EU exit. This created a dangerous rigidity. Countries forfeited monetary sovereignty but retained full exposure to market shocks. With no mechanism for rebalancing or escaping, the system was prone to crisis.

A tool that worked only for the strong economy

The euro was built on German-style monetary orthodoxy: low inflation, tight fiscal policy, and central bank independence. For high-productivity export nations like Germany, this model fit perfectly. For weaker southern economies, it meant permanent structural disadvantage.

Germany benefited from an undervalued currency. If the Deutsche Mark had remained, it would have appreciated. Instead, the euro lowered the price of German exports, fueling its trade surpluses. Southern economies like Greece, Italy, and Spain, on the other hand, were saddled with a currency too strong for their economies (title The Euro Trap, Hans-Werner Sinn).

Why the euro is also harmful to strong economies

Although Germany and the Netherlands initially benefited from cheaper exports due to the low euro exchange rate, they pay a high price in the long term. The eurozone has effectively become a permanent transfer union, in which strong economies contribute billions to support funds, guarantees, and emergency loans for weaker member states (European Stability Mechanism, Eurostat/ESM data).

Cost of bailouts

Both Germany and the Netherlands are major net contributors to mechanisms like the European Stability Mechanism (ESM), through which countries such as Greece and Portugal were supported during crises. These bailout packages did not only benefit weaker economies, but also served as lifelines for banks in core countries, particularly in Germany and France. The burden ultimately fell on taxpayers in the stronger member states (The Euro and the Battle of Ideas, Markus Brunnermeier et al).

Erosion of savings

Due to the ECB’s monetary policy, particularly negative interest rates and large-scale asset purchases, savers in Northern Europe lost billions in interest returns. In the Netherlands, pension funds were forced to calculate using extremely low actuarial rates, leading to pension cuts despite positive returns (Sparen in tijden van rente nul, DNB).

Shift of responsibility

Strong member states are increasingly losing fiscal autonomy, while at the same time being held responsible for the debts of less competitive countries. The Netherlands is not allowed to relax its budget rules to invest domestically, but is still required to contribute to joint EU funds for countries that systematically refuse to reform (Die Target-Falle, Hans-Werner Sinn).

Price shock and loss of purchasing power

Disguised inflation

One of the most immediate consequences of the euro’s introduction was a jump in consumer prices. Though official statistics minimized the issue, citizens noticed the difference. Goods that once cost 1 Deutsche Mark or 1 guilder were often repriced at 1 euro. This effectively doubled prices for everyday items in countries like Germany and the Netherlands.

While the European Central Bank dismissed the concern as “perceived inflation,” the reality was confirmed in sectoral studies (title Euro and Prices: A Comparative Analysis, ECB). Restaurants, groceries, and services underwent sharp increases between 2002 and 2004.

Wage stagnation

Meanwhile, wages remained flat. In Italy, real wages are at levels seen in the early 1990s. The disconnect between rising prices and stagnant income led to an erosion of living standards across the eurozone periphery (title La trappola dell’euro, Alberto Bagnai).

Savings were also hit hard. Ultra-low interest rates, set to serve the eurozone as a whole, destroyed returns for savers, especially in northern countries. What the ECB promoted as stimulus was, in practice, a hidden tax on the middle class.

The euro and the Greek collapse

A crisis manufactured by design

The Greek debt crisis exposed the structural flaws of the eurozone. Once inside the euro, Greece gained access to cheap credit, borrowed heavily, and imported more than it exported. When the 2008 financial crisis struck, the country was overleveraged and vulnerable.

Unable to devalue its currency or set its own interest rates, Greece turned to the so-called Troika (European Commission, ECB, IMF). The result: harsh austerity measures, wage and pension cuts, and social collapse. Greek GDP shrank by over 25 percent, and unemployment rose above 27 percent (title Adults in the Room, Yanis Varoufakis).

Bailouts that saved banks, not people

The 2010 and 2012 bailouts were structured to repay French and German banks, not to rescue the Greek people. Public money was used to service private debt. As Varoufakis writes, it was “the greatest transfer of public wealth to private creditors in peacetime” (title The Global Minotaur, Yanis Varoufakis).

The Greek population paid for the sins of a system they did not design. Hospitals ran out of supplies, suicide rates increased, and hundreds of thousands emigrated. A currency meant to unify Europe instead turned one member state into a debt colony.

Fiscal handcuffs and permanent austerity

The Stability and Growth Pact

The eurozone imposes strict rules on deficits (3 percent of GDP) and debt (60 percent of GDP). These Maastricht criteria were designed to ensure discipline, but they leave no room for counter-cyclical policy. In downturns, governments are forced to cut spending rather than stimulate growth.

This economic straitjacket turns recessions into depressions. Spain, Portugal, and Italy were unable to launch stimulus packages during the eurozone crisis. Austerity cut demand and worsened unemployment, prolonging stagnation (title The Euro and the Battle of Ideas, Markus Brunnermeier et al.).

The false comparison with the US

Unlike the US, which can print dollars and run deficits to stimulate demand, eurozone countries must beg Brussels and Frankfurt for permission. Yet the eurozone lacks the kind of fiscal transfers or common debt seen in federal systems. There is no European treasury. It is monetary union without fiscal union, and the consequences are catastrophic.

A currency that widened inequality

Divergence, not convergence

The euro was supposed to bring economic convergence. Instead, it intensified divergence. Between 2000 and 2020, Germany ran massive trade surpluses while countries like Greece and Spain ran equally large deficits.

Germany’s exports flourished. Southern industries collapsed under the weight of an overvalued currency. Italy’s manufacturing sector lost competitiveness, and youth unemployment in Spain and Greece hit 40 to 60 percent during peak years (title EuroTragedy, Ashoka Mody).

Inequality within nations

Within countries, the euro has fueled inequality. Financial markets boomed, but workers’ wages stagnated. Real estate in major cities soared while rural areas were left behind. The European Central Bank’s policies of asset purchases enriched the top 10 percent while offering nothing to the working class (title Act now or sink together, Heiner Flassbeck).

Loss of democratic sovereignty

Rule by technocrats

The euro handed economic policymaking to unelected bodies. The ECB, the eurogroup, and the European Commission can overrule elected governments in budgetary matters. This was made explicit when the ECB threatened to cut off liquidity to Greece unless it accepted austerity terms in 2015.

The power of the ECB is unchecked. Its decisions affect millions, but it is shielded from public accountability. As Nobel laureate Joseph Stiglitz wrote, the euro “has undermined democracy in ways unimaginable before its creation” (title The Euro and its Threat to the Future of Europe, Joseph Stiglitz).

The end of sovereignty

Eurozone countries can no longer choose their own fiscal paths. National budgets must be approved by Brussels. If a government attempts to increase social spending or cut taxes without EU approval, it risks sanctions. This has led to public disillusionment and rising Euroscepticism across the continent.

No real benefits for the people

Minor conveniences, major costs

The euro’s advantages are mostly cosmetic: no exchange fees when traveling, standardized pricing, easier transactions for large corporations. But these conveniences are minor compared to the structural costs.

For citizens, there has been no boom in living standards. Real wages have stagnated. Public services have declined. Economic security has evaporated. Meanwhile, the benefits have gone to multinational corporations, financial institutions, and export giants.

Trade gains overstated

Although proponents argue that the euro increased trade, most of the trade growth can be attributed to the single market itself, not the single currency. Studies suggest that similar or better results could have been achieved through stable exchange rate agreements without eliminating national currencies (title The Euro and its Threat to the Future of Europe, Joseph Stiglitz).

A fragile future

No tools, no solutions

The eurozone is structurally unfit to handle shocks. Whether it was the 2008 crash, the euro crisis, or COVID-19, the system lacks tools for coordinated response. Monetary policy is centralized, but fiscal policy is fragmented.

While the EU did launch a pandemic recovery fund, it remains a one-time mechanism, tightly controlled, and insufficient for structural problems (title Post-Covid Europe, Bruegel Policy Contributions). Without full fiscal union or political integration, the euro remains a house built on sand.

Growing political instability

The euro has fueled discontent across Europe. From Syriza in Greece to the Five Star Movement in Italy and the AfD in Germany, backlash is growing. Citizens sense that the euro serves elites, not ordinary people. The result is rising nationalism, falling trust in institutions, and threats to the very union it was meant to strengthen.

Conclusion: unity in name only

The euro was introduced as a tool of integration, peace, and prosperity. In practice, it has generated inequality, instability, and social hardship. It is a currency optimized for bankers and exporters, not for workers, students, or pensioners.

Rather than bringing Europe together, it has driven it apart. Southern economies have been hollowed out, sovereignty has been lost, and citizens feel increasingly powerless. Without radical reform or democratic control, the euro will continue to serve as a tool of economic coercion rather than cohesion.

Its legacy so far is not prosperity, but broken promises.