The euro has been Malta’s currency for over a decade and while most people are aware of the eurozone’s existence, the implications of the eurozone can, at times, be missed. From its inception in 1999, the project has been followed by controversy and criticism, yet so far, it has managed to hold its ground as a viable, stable and strong currency.
The creation of a single currency, shared by a sizable number of economically powerful nations, has resulted in many economic and consumer benefits. Tourism within the eurozone has increased as travelling no longer requires exchanging currency. Trade has been facilitated across European states, bolstering the economy of its users, and the Euro has become a strong currency that resists volatile fluctuations, something smaller states particularly benefit from. These are all great aspects of having the euro, benefits accentuated by the long-term stability of the zone and the investability it creates.
Unfortunately, there are also disadvantages to the euro, and what makes them worse is that they mainly affect struggling economies, which already have a hard time trying to prevent a financial crisis. The benefits of the eurozone come with a price that is not universal and which ranges from the insignificant to a gruelling climb from the recession, as seen with Greece. When a nation enters the eurozone, it loses control over its monetary policy. This, to some, might seem like quite an unimpactful thing, but it means that a country cannot print money at will or change interest rates. Therefore, when a country is not doing so well, it is limited to fiscal policy to try to change things. This restriction on countries entering an economic death spiral can have serious ramifications on a country’s prospects of recovery, something some countries realised once it was too late during the 2008 financial crisis. Greece, for example, was considering switching back to the drachma, which had been its currency before the euro, but the high costs of implementing a new currency, as well as the pressure from the EU, prevented this from happening.
All of this is because decisions regarding interest rates and printing of the euro are decided by the European Central Bank (ECB), instead of national central banks. This means that decisions are taken based upon the overall economic status of the eurozone, since taking measures to rectify economies doing badly would have negative results on those doing well, and vice versa. This state of play is why interest rates have been so low in Malta, despite economic prosperity. Taking power away from the ECB would not solve the problem - if these decisions were not taken by the ECB, individual nations would not think twice about taking advantage of the euro. For example, Malta, as a relatively small country, could print large quantities of euro compared to GDP, since its small size would not affect the price of euro measurably. Hence having the ECB decide what to do is a necessary trade-off.
Considering all this, one might question why the euro was created in the first place, given the potential adversities. However, despite the implications of the eurozone being economic, the reason for its creation was not solely that. The tangible, financial effects were definitely not ignored, yet the most valuable thing about the euro is its message; a message of unity within the EU, a message that has so far mostly succeeded.
With all of the good and bad, one thing is clear - without the eurozone Europe would not be the same. To many, the Eurozone will remain a symbol of the strength of the European Union and a bastion of stability, while others will inevitably see it as the shackles tying us to an ever closer union. Well and truly, as often happens with such matters, it’s mostly a matter of opinion.