For Nobel economist Robert Mundell, “Father of the Euro“, it must be heart breaking for him to read headlines like “EU Sets 50% Greek Writedown, $1.4 Trillion in Debt-Crisis Fight” and “Euro zone rescue fund will have firepower of 1 trillion euros“.
In 2001, my MBA economics professor asked us to give a class presentation on something economics related, and I decided to talk about what I knew about Euro (not from the course itself but from readings of my own). I titled my talk Benefits and a potential weakness of the Euro (slides on Google). Here are the few key slides (high res readable version).
The crux of my ideas came from a heated & insightful debate (updated link from internet archive) I read in National Post in Dec 2000 between Nobel economists Robert Mundell and Milton Friedman. The following are quotes from Friedman (emphasis added to original text used in my presentation),
“Bob and my disagreement about the euro is identical with our disagreement about Bretton Woods. The euro encompasses 11 politically independent countries, differing in culture, resources and economic development, and subject to divergent influences. There are bound to develop among them differences about appropriate monetary, fiscal and other policies. Flexible exchange rates offered a way of adjusting to such differences through the market without political conflict. The euro closes that possibility. Bob is confident that other adjustment mechanisms will rapidly develop—greater internal flexibility in prices, regulations, and the like. I hope he is right, but I fear he may not be. If he turns out not to be, the euro will generate more political conflict, not political unity. […]
The members of the euro have accepted restrictions on their fiscal policy, but it remains to be seen whether they will be honored, and if they are not honored, whether the monetary community can enforce them. Those tests are yet to come.“
I doubt any of my classmates remember this but it is cool for me to look back and think that I picked an interesting and important topic to discuss even for a simple class presentation. Feel like patting myself on the back a little.