The previously unthinkable idea that the euro zone might not last is now becoming a commonplace in political and economic discussions. But before asking whether, when and how all this will happen, we first need to see how we got here.
The European Union (not an optimum currency area) was launched with serious design faults, making the change ‘irreversible’, and with no provision for countries to leave or be expelled from the union. Critically too, it was launched with no mechanism for dealing with the inevitable asymmetric shocks.
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