Financial encyclopedia

The euro zone is composed of 19 EU member states that use the euro, and its goal is to promote economic growth and intra-regional unity through monetary unification. However, this grand blueprint is not smooth sailing, internal contradictions are gradually emerging, and some countries even regret joining the euro zone. Main reasons:

Lose monetary policy autonomy

After joining the euro zone, countries need to accept the unified monetary policy formulated by the European Central Bank (ECB), but there are great differences in the economic conditions of member countries, such as Germany, which has strong economic strength and tends to have a stable monetary policy (low inflation). Greece and Spain need more easing policies to stimulate the economy.

This kind of policy disharmony makes countries with weak economies lose the flexibility of adjustment in the face of internal crises.

Economic structure difference

There are obvious differences in the economic structure of the member countries of the euro zone, for example, the northern countries have strong industrial base and outstanding export competitiveness. However, the southern countries mainly focus on tourism, agriculture and other service industries, and their competitiveness is relatively low.

With the introduction of a unified currency, southern countries have lost the advantage of currency devaluation, and it is difficult for their exports of goods and services to remain competitive, and the trade deficit continues to expand.

Fiscal discipline and debt problem

The euro zone requires member countries to abide by strict fiscal discipline, such as the deficit should not exceed 3% of GDP. However, some countries (especially Greece) failed to effectively control public expenditure, which eventually triggered the sovereign debt crisis in 2010.

The gap between people's living standards has widened.

Although the unification of the euro has improved the export competitiveness of the northern countries, the wealth is concentrated in the north. Relatively speaking, the economy of southern countries is stagnant, the unemployment rate is high, the income growth of residents is slow, and the confidence in the euro is declining.

Politicians in some southern European countries, such as Greece, Spain and Italy, believe that joining the euro zone has dragged down the domestic economy. It is pointed out that if the domestic currency is retained, the export competitiveness can be enhanced through depreciation; Avoid being constrained by the EU's fiscal austerity requirements.

Greece has repeatedly talked about leaving the euro zone (namely "Grexit"), but it has not been realized because of the extremely high exit cost.

Although the euro zone faces many challenges, the cost of leaving the euro zone is too high, and most countries will still choose to stay in the system. How to narrow internal differences will be a big test in the future.