In fact, the eurozone is now a lot more resilient in coping with external shocks than its constituent economies were before 1999. True, the members of EMU, like the rest of the world, are feeling the pinch from the current turmoil and high commodity prices.
Yet, without a common currency it is likely that the current financial crisis and US downturn would have brought serious disorder to the European economy. Before the euro, exchange-rate realignments in times of economic turbulence often disrupted trade and investment.
In contrast, the disappearance of exchange-rate costs and risks has boosted cross-border trade and investment. The euro has also been a powerful driver of financial market integration, doubling to 40 percent the share of euro-area equities held across borders and fostering cross-border mergers and acquisitions. There have been 16 million new eurozone jobs created over the past 10 years, three times the number created in the previous decade.
Despite these obvious gains, the criticism often leveled at the euro is about low growth and low productivity. It is true that while the euro has boosted labor productivity per hour worked by as much as 5 percent, growth has averaged around 2 percent over the past 10 years - not a great difference from the previous decade.
Yet this figure is explained by low growth in Italy and Germany, the latter being an exceptional case as it struggled to regain competitiveness during the first half of this decade following the costs of reunification. Indeed, remove the German data, and euro-area growth rises to an average of 2.5 percent since 1999.
Of course, there is room for improvement. While some eurozone countries have performed exceptionally well, the growth rate of others has been undeniably modest. But if some politicians have used the euro as a convenient scapegoat, the real reason lies with the pace of economic reforms, rather than the single currency. Since 2006, Germany has flourished thanks to its program of reforms and continues to expand at a strong pace despite the cooling economic climate.
There is scope for EMU to be an even more effective platform to coordinate and advance sound policymaking in the euro area. Which is why this important anniversary is both an occasion for celebration and reflection.
As we prepare the ground for a prosperous second decade of the euro, we are confident that the European single currency will become an even more valuable asset supporting the stability and dynamism of the European Union as a whole.
(China Daily via The Guardian June 3, 2008)
