The eurozone package is politically more complicated. it's designed to show that 16 nations sharing the euro currency will stand united behind the debts of member nations to stave off a potential crisis of confidence that could damage them all." (Trumbull, 1)
This complexity is underscored by the inherently questionable imperatives of the European Monetary Union. Indeed, one of the core challenges of free trade, globalization and the establishment of intra-continental unions is the inherent difficulty in facing up the inherent incongruity of the aligning markets. The European Union has served as a prime example of this, matching a widely varied set of nations in a single economic pact. The result is that in many contexts, visible distinctions remain even as economic policy is set with the collective in consideration. These distinctions are not necessarily irreconcilable, but under the current structure of the European Monetary Union, they most certainly are. A view into production and retail industries under less than a decade of a one-currency system shows that the gap between member states has defied legislative efforts and control. In a discussion on the legislation impacting the European auto industry in recent years, for instance, it is important to recognize that there are certain core causes for the continued disparity in auto pricing owing almost entirely to the distinctions amongst member states in terms of domestic production economies. (Kirman & Schueller, 69) in contexts where high costs of production, operation and retail have persisted, so too has the price differential impacting the consumer.
It is difficult to resolve that a pure single market is a feasible ambition. Suggesting that it is, it remains a difficult task to determine whether or not such core price differentials can be altered or diminished. As current legislation emerging from EU sanctioned policy-making bodies has focused on heightened regulatory oversight for safety, emissions and fuel-efficiency standards in European cars, we can see that there are certain ways in which the union will seek to effect price equalization.
However, current conditions suggest that the gap separating some of the most developed -- and therefore already most standardized producer nations -- and the least developed of nations is perhaps too wide to be eliminated thusly. Myriad characteristic differences have created a circumstance, for instance, where one car model will cost a U.K. resident roughly 63% more than it will cost a resident of more recent union member, Greece. (Madslien, 1)
Domestic market difference and differing consumer buying power potentials will be only further highlighted as the European Union admits increasingly less developed states such as those former Soviet and North-of-Africa nations seeking admission. It seems highly unlikely that as the union becomes broader that it will be in a position to equalize pricing.
This is to note that the consequences of admitting nations not critically prepared for equal participation in the union are felt by all member states, who must not only absorb the economic instability of these developing nations during times of crisis but which have shouldered much of the burden to support a potentially unsupportable system. These cost inequalities suggest that the purposes supposed by the monetary union are not being achieved. Simultaneously, all nations persisting under the one-currency system are in a place of critical economic need based on the Greek crisis and yet lack the fiscal policy control to effect necessary change. In fact, such is a dilemma that serves as the most observable common ground between those nations at the top and the bottom of the European Union's socioeconomic ladder. Such is to say that all of the nations now working under the Euro lack the ability to effect currency values through fiscal policies as a way of correcting inherent economic down cycles such as the current global recession now making its presence most felt in Europe.
Essentially, what this means is that we must take a step back from the full-throttle immersion into continental currencies that has shaped global economic policy for the last two decades and reexamine the claims driving this process. In contexts such as Greece, all indications are that its present collapse could have been staved off by a maintained jurisdiction over its own currency. Over its history, the economically troubled nation has frequently been forced to adjust its debts by imposing an inflationary economy upon its people. Though the short-term impact of the devalued currency would of course cause economic pains, it should be considered a preferable outcome to the outright collapse at which Greece is now looking.
With respect to the primary discussion point here, Greece is a salient cautionary tale suggesting that those ill-prepared to make the fiscal adjustments necessary to adopt the Euro would be ill-advised to manifest an appearance to the contrary. Indeed, prescient views on the European Monetary Union would predict the inevitability of such an outcome for a nation of Greece's relative poverty. And the nation itself could be seen as roughly interchangeable with Greece. To the point, Brouwer (2010) reports that "a cover story in Business Week magazine, perhaps 15 years ago before the euro was adopted, envisioned how it would collapse. As Greece was not seen as an eventual member then, the story imagined the crisis would start in Italy, and almost exactly as it has played out in Greece, with poor budget management leading to economic punishment from Europe, leading to rioting in the streets." (Brouwer, 1)
This exact outcome has come to pass in Greece, and stands in clear declaration to those desiring entrance into the European Union that additional entrance into the monetary union should not be sought without consideration of the relative importance that fiscal determination has played on supporting a nation's economy. Nations such as Greece which are fundamentally unsound in economy have relied upon the ability to manipulate fiscal policy so as to survive the types of cycles being absorbed the market today. By granting these states membership to the currently unsteady institution of the Euro, the threat becomes greater of collapse both for these individual nations and for the Union as a whole, which with its most recent bailout actions may well be on the path to discrediting the very existence of the Euro.
Should this currency survive into the next decade, the decisions by which nations are admitted into this partnership must be approached with far greater care. In reality though, it is not far-fetched to argue that the events currently taking place are the inherent outcome of an implausible globalizing ambition.
Baetz, J. (2010). Merkel: $1 Trillion Rescue Package Only Buys Time. Atlanta Journal -- Constitution. Online at http://www.ajc.com/business/merkel-1-trillion-rescue-528257.html
Bilefsky, D. (2010). Greece's Stumble Follows a Headlong Rush Into the Euro. The New York Times.
Brouwer, K. (2010). Is it the Euro or the Yugo? MarketWatch.
Greek Embassy. (2007). Greece in the E.U. Embassy of Greece; Washington, D.C.
Kirman, a. & Schueller, N. (1990). Price leadership and discrimination in the European car market. The Journal of Industrial Economics, 39(1), 69-91.
Madslien, J. (2002). European car market set for shake-up. BBC News. Online at http://news.bbc.co.uk/2/hi/business/1775384.stm
Trumbull, M. (2010). To stave off Greek debt crisis, euro zone unveils its own TARP. The Christian…