25 Years of the Euro: Of Successes and Design Flaws

Last Updated: 8. Januar 2024By

The Euro celebrated its 25th anniversary on January 1st, even though the common currency has faced several crises and is often referred to as the „Teuro.“ Is this truly a success story?

According to tagesschau.de, politicians were already discussing a common European currency in the 1970s in order to prevent fluctuations of national currencies beyond a certain range. For this reason, the so-called „ECU“ was created in 1979, a unit of account in the new European Monetary System.

It would still take some time before the introduction of a „real“ European currency. It wasn’t until 1999 that it finally happened. On January 1st, the Euro was first introduced as an electronic currency and on January 1st, 2002, as physical cash.

The benefits of a common European currency were already a topic in the 1970s. Currency exchange and conversions would no longer be necessary for travel, and prices for goods and services would be more comparable. This could simplify trade within Europe.

However, there were also critical voices regarding the introduction. The then-foreign minister Hans-Dietrich Genscher called it a premature birth. „It’s about creating trust because this trust is also justified,“ argued Genscher in the Bundestag debate on April 23rd, 1998, when it came to the introduction of the Euro as the new common European currency.

There were particularly large concerns in Germany. The Deutsche Mark was considered a strong currency, one that the Germans had built trust in after World War II. They did not want to give up the currency that had enabled their economic miracle. Numerous economists warned against it, not wanting a Euro for Germany, but ultimately the supporters got their way.

The Euro is seen as a symbol of Europe, representing the peaceful coming together of many European countries with different economic strengths and political leadership styles. Despite criticism, the common European currency is now an integral part of global trade and has become the second most important reserve currency.

Dangerous Design Flaw The successes are often highlighted, while the problems are swept under the rug. One such design flaw of the Euro is that there is a common monetary policy, but no counterpart on the fiscal side. This would include a joint control of government spending and revenue.

Theoretically, the Maastricht criteria were supposed to prevent member states from facing financial difficulties. However, these criteria were never met. Many countries already had a debt-to-GDP ratio above the required 60% at the time of accession, and in the wake of the financial crisis, the debt-to-GDP ratio in many countries has risen, in some cases dramatically. Therefore, it is questionable whether the Euro will last another 25 years or eventually collapse.

What You Should Do Now You should always keep the weaknesses of the Euro in mind when planning your investment strategy. This is easier with professional support, which you can find, for example, in „Sicheres Geld“ („Safe Money“). „Sicheres Geld“ is an advisory service for critical investors who want to actively protect their assets. Readers are very satisfied with the recommendations, as they have been able to protect and increase their assets despite the crisis in recent years. You can do the same.