056 ESC 12 E - THE SOURCES AND IMPLICATIONS OF THE EURO CRISIS

The European Union's common currency area confronts serious fiscal, financial and structural challenges, but it is the market's lack of confidence in EU political decision-making which has propelled the crisis of the euro since early 2010. Europe's problems include high unemployment, slow growth, sovereign debt crises in several countries, a banking crisis, and a political crisis as European leaders have not been positioned to take decisions which would solve the ongoing euro problem, such as a decisive move towards fiscal union.  Public opinion is shifting rapidly.

The report describes the background of the euro project before the recent economic crisis as well as the bailouts and other steps EU leaders have taken to handle the crisis A key concern going forward in Europe is how long democracies can sustain such high unemployment (eurozone unemployment is at an all-time high above 10%, youth unemployment is now above 50% in Spain and Greece) without a fatal political backlash against the monetary order, which is partially responsible for their suffering. The focus on austerity could mean that spending cuts will continue to trigger slow growth. This, in turn, could  worsen fiscal woes in several states. The report concludes that eurozone countries should not abandon the common currency, but address systemic weaknesses. It also emphasizes the importance of maintaining democratic dialogue in societies which are asked to make all manner of sacrifices to maintain market credibility.

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