Malta adopted the euro in January 2008. The decision to adopt the euro has proved to be an excellent decision and has certainly contributed to economic and financial stability in this country.
I cannot imagine what would have happened had we not joined the euro then, and be faced later with the financial crisis the rest of the world experienced in 2008. I highly doubt we would have survived it. EU membership also meant the free movement of capital. Capital would have flown out of the country in such a situation. Instead, thanks to sound economic management in the years subsequent to 2008 and the adoption of the euro, capital has flown into the country and seems to be continuing to flow in. So it seems pretty clear that the euro was certainly a good thing for Malta.
I also believe that it was a good thing for the other countries that joined the eurozone, even if not all of them reaped the full benefits of such membership. The monetary policy implemented by the European Central Bank has been wise and this institution has done all it could to safeguard the euro. Like any other currency it has had its ups and downs. This is why it is difficult to understand the bashing that some economic analysts (mainly of Anglo Saxon origin) have been giving the euro. They claim that the way the current eurozone is structured is unsustainable and will not be able to survive the next economic crisis. What has helped it survive so far has been cheap oil, low inflation and therefore low interest rates, and less fiscal austerity.
Cheap oil has certainly contributed to lower costs of production and therefore cheaper products. Low interest rates have also helped to sustain discretionary expenditure. Less fiscal austerity has enabled eurozone governments to implement growth policies. What is wrong with that?
I cannot imagine what would have happened had we not joined the euro... I highly doubt we would have survived
What is also difficult to understand is what makes the euro so different from the US dollar and the pound sterling. Have they not also had their ups and downs over the years with the US dollar coming close to 0.75 euro cents? And what about the current value of the pound sterling?
In terms of fiscal austerity, none of the other world leading economies can teach the eurozone economies any lesson. The fiscal deficit in the US is unsustainable and it is only China’s positive approach that has helped the US avoid a crisis (keeping in mind that China holds a significant amount of American government debt).
The new UK government, led by Theresa May, has practically done away with the fiscal deficit targets set by its predecessor led by David Cameron. Thus, in both the US and the UK there has been less fiscal austerity.
Another issue that has been mentioned in criticism of the euro is the lower rate of growth that the eurozone has been having when compared to the US economy. In effect the growth rate between the year the euro was introduced and 2008 (the start of the financial crisis) has been more than acceptable. On the other hand, the eurozone has not really managed to get out of the recession caused by the 2008 crisis.
However, has the performance of the US economy and the UK economy been as robust as some analysts are making it out to be? Let us consider just one point: both the Federal Reserve and the Bank of England have been exceedingly unwilling to raise interest rates. The Federal Reserve introduced just one small rate hike but stopped there. They would not have adopted such a policy if economic growth were strong, robust and sustainable.
Where some of the member states of the eurozone failed miserably has been in the implementation of reforms in the welfare, education and labour sectors. The lack of such reforms is holding back these countries from registering higher growth rates and from tackling the unemployment problem.
Thus, the issue is not so much the structure of the eurozone but the lack of willingness of some governments to implement policies that would have enabled them to benefit more from the accommodating monetary policy of the ECB.
This is why the bashing being given to the euro is unjustified. On the other hand, the strong leadership shown by the ECB needs to be supported by strong leadership from national governments to ensure that the much needed and spoken about reforms are implemented.