Monday, January 29, 2007

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The euro disconnect

There's something a bit odd about the contrast between a) economists debating the prospect of the euro supplanting the dollar as the world's reserve currency, and b) the fact that Europeans don't like the euro all that much. The Financial Times' Ralph Atkins explains:

An overwhelming majority of citizens in the big eurozone countries believe the euro has damaged their national economies, highlighting the popular scepticism that still surrounds Europe’s eight-year-old monetary union.

More than two-thirds of the French, Italians and Spanish – and more than half of Germans – believe the single currency has had a “negative impact”, according to an FT-Harris poll. In France, just 5 per cent said the euro has had a positive effect on the French economy....

[M]ore than half of citizens in countries using the euro say they prefer their former national currency, according to the poll of 5,314 adults in Germany, the UK, France, Spain and Italy, which was conducted between January 10 and January 22. Almost two-thirds of Germans say they preferred their former currency, the D-Mark.

UPDATE: Henry Farrell provides an explanation for the oddity.

posted by Dan on 01.29.07 at 08:42 AM


Intellectuals don't agree with the masses, and you find this 'a bit odd'?


posted by: Sk on 01.29.07 at 08:42 AM [permalink]

The Germans I can understand, but I cannot understand the Italians in this regard.

posted by: Randy Paul on 01.29.07 at 08:42 AM [permalink]

I think all mainstream Continental parties, though committed to the Euro and, generally, the EU, find it far easier to blame forces outside their control (globalisation, the Euro, EU liberalisation, Polish plumbers) than their own failings. Schroeder, Chirac and Berlusconi were particularly good at it.

posted by: Shaun on 01.29.07 at 08:42 AM [permalink]

Isn't this something that one could subject to an empirical test? I'm not an economics guy, nor a numbers guy, but it would seem to me that there's a paper to be written (and large grant to be won) offering a "cost of currency" model on how much is saved / lost and where those gains and losses are distributed in currency unification (with cross-application to dollarization).

posted by: peter on 01.29.07 at 08:42 AM [permalink]

In frequent discussions on this topic, an experienced bond dealer constantly tells me that the market for Euro denominated investments just is nowhere near as deep and liquid as the market for the $US denominated vehicles. Hence not only are $US investments still the first best choice for major savers (and hence the $US itself the preferred vehicle), but the Euro is a far second (not a close second). Some also suggest that a Chinese Yuan dominated Asian financial market is more interesting and impending scenario than a $US v. Euro battle.

posted by: jprime271 on 01.29.07 at 08:42 AM [permalink]

This issue regarding the Euro being used as the currency worldwide is in direct relation to the concept of globalization. What was once a world of diversity is quickly developing into a uniform global society. I believe that this could be a reason why many Europeans are unhappy with the implementation of this singular currency. Every nation is prideful of the elements of their country that distinguish it from another, even if it is simply the currency. The things that make us different are what make the world interesting, why travel across continents if everywhere you go you see the same thing. The establishment of the Euro in Europe was the beginning to the end of our diversity and it is a sad thing.

posted by: Brian on 01.29.07 at 08:42 AM [permalink]

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