Is The Euro Destined To Fail?

Austan Goolsbee believes so:

At the time of the formation of the euro, I would say most American economists said that’s not a good idea, that’s not a currency area that makes sense. And the answer from Europe was, how is Missouri and Mississippi a currency area? But the flaw in that was not recognizing the importance of mobility.

In Michigan, in the mid-’80s, the unemployment rate goes way up because a lot of factories shut down. And then, the mid-2000s, to pick a date, the unemployment rate in Michigan isn’t that much higher than in the rest of the country. But the main way that happened is people moved. What makes us a workable currency area is that people can move around. And that happened in East Germany too. They could move around. But the Greeks don’t even speak the same language as the Germans. Seven million Greeks can’t pack up and move to Germany. So low mobility, plus having the wrong currency values, plus no subsidies, is a toxic mix.