Greece is in a state of economic and financial crisis that’s dominated global headlines this week. Vox’s Matt Yglesias explains the real roots of the crisis.
As an economic policy,the Eurozone, is an idea with some serious flaws. The Eurozone is not what economists call an optimal currency area — its economies are too big and disparate.
One way this flaw plays out is that Europe has very limited labor mobility compared to, say, the United States. If the economy is strong in the Netherlands but weak in Spain, it’s difficult for Spanish people to simply move to Amsterdam where they don’t speak Dutch. European countries maintain separate welfare states, and have very different average living standards. Consequently, economic conditions can be very different in one part of the Eurozone than in another, making it difficult for the ECB to create policy that is appropriate everywhere.
The political meaning of the Eurozone and the European Project differs a bit from place to place. To France and Germany, it means the end of war. To Ireland, it means independence from the United Kingdom. To Finland and Latvia and other eastern states, it means independence from the Russian sphere of influence. For Spain and Portugal, it means the end of dictatorship and integration into the realm of democracies. For Greece, it means (unlike Turkey) certification as a real European country.
Source: Vox. Related :