The Pros and Cons of the Euro

¶ … Boom in Busts: Good or Bad?

There are several pros and cons in the bankruptcy legislation issues. In the current European systems, entrepreneurs forced to file for bankruptcy protection carry business failures and associated debts for years, may be liable to criminal charges and may even be driven to suicide by crushing failure and ongoing debt (Peng, 2014, p. 145). Those consequences and the "fear of failure" rampant in Europe causes some entrepreneurs to abandon their ideas without ever trying to develop them. The "advantage" of the current system, however, favors the creditors because creditors are still supposed to get paid; the money owed to them does have to be simply written off as losses (Peng, 2014, p. 145). The American system, which gives bankrupt entrepreneurs two options -- either complete liquidation and walking away from debt or restructuring to renegotiate with/pay creditors according to court-approved schedules -- also has pros and cons. The obvious "pro" is that entrepreneurs are likelier to try new ideas when the penalties for failure are not so devastating (Peng, 2014, p. 145), creating more opportunities for business. Meanwhile, Donald Trump signifies the most obvious "con" (in more ways than one). Trump is an entrepreneur who has filed four bankruptcies in 25 years in a series of failed businesses, which forced creditors to take less than they were owed and over a longer period of time (Carroll & Youngman, 2015). While Trump might deem that "business as usual," it cost his businesses' creditors.

It appears that there is room for bankruptcy reform in Europe, particularly toward something like America's Chapter 11 Bankruptcy, which restructures debt, renegotiates and pays creditors over time (Peng, 2014, p. 145). It is basically done to save a business and to pay creditors, with a court presiding over the process. That method seems to be a humane approach to entrepreneurial ideas that might fail and to creditors who should be paid. This is a hybrid solution that neither lets creditors walk away nor punishes them just for the sake of punishing them. This restructuring approach seems the most logical and likeliest to succeed.

2. Why is Germany a "reluctant hegemon" in the EU?

Germany is the reluctant hegemon because it is a financially powerful European country that is called upon to save several weaker countries in the EU, sometimes repeatedly. A "hegemon" is a powerful entity and Germany is certainly that due to its wise economic policies, leading to its relatively healthy financial situation and historic surplus (Peng, 2014, p. 131). However, as Germany was using wise financial practices, other countries such as Greece were financially failing badly due to: consumer demand increase; a government spending binge; excessive borrowing, budget deficits, huge national debt, unrealistic debt payments; government corruption; a "shadow" economy and tax evasion (Peng, 2014, p. 131). While Germany was the wise adult, Greece was the foolish teenager. Unfortunately for Germany, it could not simply let Greece and other economically failing EU members fail because of the interconnections of their business economies, including but not limited to the euro. Germany had to give the lion's share of bailout money for: Greece; Hungary; Latvia; Romania; Ireland; Portugal; Cyprus; and Spain (Peng, 2014, p. 131).

3. Why does Germany have to be assertive in the EU?

Germany must be assertive in the EU for three basic reasons: even after giving multiple bailouts to other countries, the other countries apparently refuse to institute meaningful economic reform; Greece's new prime minister, in particular, is hinting at the possibility of Grexit while demanding forgiveness of a large portion of its debt, that its citizens be able to live with less austerity and that other EU members' euros be "evaporated"; and Germany's economy is still interconnected with those financially weak countries (Peng, 2014, pp. 131-2).

4. What are the benefits and costs of using a common currency for Germany, Greece, and the EU?

There are quite a few benefits of the euro. First, the shared currency among numerous European countries allows unity, cooperation and price transparency: for example, the president of the euro summit reports to the EP after every summit and member parliaments regularly confer with each other (Crum, 2013, p. 622). Secondly, shared currency makes travel among the member countries far easier without repeated, sometimes confusing and sometimes unfair currency conversions (Crum, 2013, p. 616). Third, the common currency provides a relatively stable currency across international boundaries, with relatively low inflation, low interest rates and easier international trade (Crum, 2013, p. 617). Finally, the common currency gives better protection from external economic shocks in which a country might stand or fall on its own isolated currency (Crum, 2013, p. 624). Certainly the idea of a common currency among the EU's 17 countries has provided some significant benefits to the EU's hundreds of millions of Europeans.