| It’s not! Currency fluctuations don’t allow for global trade.
That’s why after WW2, the Bretton-Woods system was established with fixed exchange rates. After that came to its end, Europe created a new system. Rates were not pegged to gold but to other European currencies (only 2% deviation allowed, 6% for Italy and Britain). That created a problem for countries that couldn’t keep up with the German economy: Stabilizing the exchange rate was getting very expensive for those countries. Germany started with zero gold reserves after WW2 and now has second place because of this system. The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system. A lot of money for an economically integrated Europe. Italy gave up some sovereignty over the money supply and pledged not to spend too much. Even without the euro, Italy had an “overvalued currency” that held it back because it kept devaluing its currency with no economic growth and, yes, no financial discipline (although, of course, Italians don’t lack discipline). The introduction of the euro relieved Italy of much of the burden. While I agree that there was a lot of populist rhetoric in the northern countries, pretending that the euro is bad for Italy and good for Germany is also populistic. The reverse is true. If you mean fixed exchange rates (going back to the 70s) are bad for Italy then one can discuss that. (But there’s a lot of economic literature against that – just imagine California and Kentucky had different and free-floating currencies and how trade would be impaired) |
> Currency fluctuations don’t allow for global trade.
I’m glade to learn every country in the world with their own currency can’t participate in global trade. Obviously fluctuation is not an issue for trading.
I’m guessing that by the pegging to each other you are mentioning the ECU and European Exchange Rate Mechanism. Its goal had very little to do with trade. It was mostly an attempt to avoid speculation and large monetary fluctuations which made debt management more costly for countries. It collapsed extremely fast and the southern countries were amongst the first to exit the system for reasons which are very close to why the euro is so poor for them.
> The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system.
A strong currency is detrimental to a country export. I’m not even addressing the rest of the paragraph as it doesn’t make much sense. Why are singling Italy by the way? The problem is the same for Spain, Portugal, Greece, in some measure Ireland and even somewhat impact France.
You are also completely failing to address the distortion of the German economy which are a large part of the issues especially after Hartz IV. If you take a look at the German wage levels, saving rates and trade balance, you will see that their money should be much stronger than the euro is.