What if Euro would have never introduced

So lets say there would still be a European Union, but the euro would have never been introduced, but the course of history would be same as in OTL, except for the fact that there wouldnt be euro and all countries have their own currency would europe be in a same crisis such as in the real world ?
 
During the late 80s the ECU was intended to bring stability to currencies within Europe, with the view of eventually turning into a single currency. But due to (West) Germany's industrial strength, all European currencies started shadowing the Deutsche Mark, and Austria, Denmark, and the Benelux pegged their currencies with the DM. When the Berlin Wall fell, it's believed Kohl made a deal with Mitterand. France would not oppose German reunification, and Kohl will permit the creation of the Euro.

With a PoD after 1990, the most likely scenario will be after Black Wednesday in 1992 when Britain and Italy were forced to devalue their currencies. Of course Britain decided never to join the Euro. This could have led to a pause in the rush to introduce the Euro.

If the Euro was not introduced, the southern currencies would be constantly devaluing and causing complaints in the north. If Germany ends up demanding the southern countries end their devaluations (e.g. by threatening to veto EU initiatives which benefit the south), the south will experience the negatives of the Euro (no chance to devalue to retain competitiveness) and will miss the positives (interest rates will remain higher, limiting the credit boom of the last decade). Eventually the southern countries will either demand that Germany make concessions in exchange for its hard line, or they will be forced to devalue by their voters. Which means either an EU fiscal union or an exit from German-imposed tough measures.

So short answer: same problems as OTL, on a smaller magnitude.
 
One of the main problems created by the Euro is the criteria that have to be met : mainly dificit below 3% GDP and debt below 60% GDP.

To achive this some (probably) all countries "lied" (outsourcing debt, outsourcing deficit). Especially Greece was very proficient in this regard.

Over the time countries were "forced" to undo that outsourcing - suddenly they had higher deficit and debt rates - without anything really had changed in the economy. - This of course weakened the EURO step by step.

When the economic crisis hit (not blaming anybody - shit and "Shareholder value" happens) the problems multiplied.

When your GDP shrinks your deficit and dept increases automatically - even when you don't actually spend more.

Suddenly even "healthy" nations had troubles meeting the criteria.

Without the Euro the "Euro" criteria would be absent or "weaker". And the effects on "weak" countries not as devastating.

Another problme was that the criteria were not relaxed (enough) during and after the crisis.

Given a weak budgetary performance the countries were forced to cut their expenses - which intensified the problem: for example if wages go down (like Greece -23% AVERAGE income), you can't expect taxes to go up... If you don't spend money on public projects you will see construction firms shed employees which in turn don't pay taxes, but worse get unemployment benefits which further adds to the deficit of the state...

IMO - the criteria should be relaxed and recovery time should be at least doubled (i.e. accept more deficit and debt for some time to allow the countries not to strangle their own economies).

And... - if you do a saving package and get hammered with another downgrading of your "rating" ( = more interest to be paid) forcing to do yet another package - don't be surprised that the opposition reaps more votes...

Europe needs more solidarity and less self interest - sure it is more expensive to keep Greece in the Euro Zone, but its the "Right" thing to do. Help your broder and don't kick him if he's already down...

Think about this way: not going to Afghanistan or Iraq would have been cheaper and safer (for the boys), but it would have been the wrong thing and in the long run the cost (rampaging terrorism) would have been higher.
 
IMO - the criteria should be relaxed and recovery time should be at least doubled (i.e. accept more deficit and debt for some time to allow the countries not to strangle their own economies).
One of the main problems with that idea is that some nations' governments will probably expand spending, to "buy" electoral support, until they run up against those new limits anyway and thus hit the barrier with even more debts to handle than they'd have had if the stricter limits were kept...
 
One of the main problems with that idea is that some nations' governments will probably expand spending, to "buy" electoral support, until they run up against those new limits anyway and thus hit the barrier with even more debts to handle than they'd have had if the stricter limits were kept...

True - but "spending for votes" will occur in any case.

Necessary is spending to avoid recession. Depending on where you spend every Euro spent creates several euros of revenue (not necessarily for thestate, but certainly for the "GDP").
 
I'm fairly sure Ireland would have been far better of without it as the interest rates were totally inappropriate for our economy, great for the Fatherland though!
 

RousseauX

Donor
IMO - the criteria should be relaxed and recovery time should be at least doubled (i.e. accept more deficit and debt for some time to allow the countries not to strangle their own economies).
And what's suppose to happen that leads to recovery?
Europe needs more solidarity and less self interest - sure it is more expensive to keep Greece in the Euro Zone, but its the "Right" thing to do. Help your broder and don't kick him if he's already down...
The reason why Greece is "down" is largely because of the Euro in the first place. Don't get me wrong: the Greeks lied and cheated their way into cheap loans, but this is a crisis which wouldn't have happened without the Euro allowing so much cheap loans in the first place.
Think about this way: not going to Afghanistan or Iraq would have been cheaper and safer (for the boys), but it would have been the wrong thing and in the long run the cost (rampaging terrorism) would have been higher.
This is just stupid and wrong because the number of acts of terrorism -increased- because of the Iraq war.
 
The reason why Greece is "down" is largely because of the Euro in the first place. Don't get me wrong: the Greeks lied and cheated their way into cheap loans, but this is a crisis which wouldn't have happened without the Euro allowing so much cheap loans in the first place.

Whereas increasing private debt was widespread in Greece, this wasn't their main problem (unlike Ireland or even Spain). In Greece, it's the insustainability of government debt without massive inflation and the fact that the markets ignored that insustainability pre-Lehman.

Now of course, without the Euro Greece would have continued its old model: people don't pay taxes, debt keeps the state afloat, inflation constantly devalues the currency and the government debt. That model actually worked - and most likely it will work again. It's not necessarily the best choice for elderly depending on pension systems and net savers, but it's definitely good for those able to bring their money abroad.
 
Whereas increasing private debt was widespread in Greece, this wasn't their main problem (unlike Ireland or even Spain). In Greece, it's the insustainability of government debt without massive inflation and the fact that the markets ignored that insustainability pre-Lehman.

Now of course, without the Euro Greece would have continued its old model: people don't pay taxes, debt keeps the state afloat, inflation constantly devalues the currency and the government debt. That model actually worked - and most likely it will work again. It's not necessarily the best choice for elderly depending on pension systems and net savers, but it's definitely good for those able to bring their money abroad.

The model didn't work. It was, and still is, unsustainable. Greece has had a rather terrible economic history: it had defaults and moratoria on debt repayments in 1826 (not settled until 1878), 1843 (which resulted in Greece being shut out of the international capital markets for decades), 1860, 1894 (which resulted in the creation of the International Committee for Greek Debt Management tasked with monitoring the country's economic policy, tax collection and management systems) and 1932-1964. The combined length of time under which Greece was in default during the modern era is 90 years, or approximately 47% of Greece's existence as an independent nation. I'm not sure about the period before the 1970s, but since at least the 1970s Greece seems to have been a net importer. So basically from 1826-1894 and from 1932-1964 Greece had debt troubles and since at least the 1970s has been spending more than it earns. It would seem that the only good economic times in Greece may have been 1822-1826 and 1895-1932. A serial defaulter which fails to collect a lot of the taxes owed to it and which imports more than it exports cannot stay afloat for ever. Even with the Drachma, Greece would have been likely to default at some point or to require debt relief. It may not have happened as soon, but it was going to happen unless Greece radically overhauled its tax collection and started exporting more or importing less. At some point Greece's debt was going to reach the levels it is at now...after all Greek government debt-to-GDP ratio had already hovered around (and at times surpassed) 100% by the mid-1990s. Devaluation and inflation would make local debt worthless and more easy to handle, but foreign debt would not be denominated in drachmas but in US dollars and either Deustchmarks or Euros. Devaluation of the drachma would only make those debts more expensive for the Greek government not less, since the tax receipts collected by the government would be in now worthless drachmas and would have to be converted in order to pay off those debts.

Greece has a real chance now to turn itself around. It just need to grasp it, otherwise its future will probably resemble its past.
 
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Greece has a real chance now to turn itself around. It just need to grasp it, otherwise its future will probably resemble its past.

The greeks have a point that the pure reliance on austerity shrinks the economy and makes things worse. Otoh, theyve got to do SOMETHING and theyre not managing to massively improve the collection of unpaid taxes, say. Moreover, the bond markets, having ignored the debt problem for ages is now hypersensitive, so a growth strategy is probably not feasible, atm, if ever.
 
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