Bust

United They Stood, Divided They Fell

In May 2010, thousands of Greeks took to the streets to protest the draconian austerity measures Greece’s economic collapse had forced their massively indebted government to adopt. But the real cause of the Greek fall had its roots in the country’s enthusiastic accession to the euro and European Monetary Union (EMU) a decade earlier.

The idea of uniting the nations of Europe politically and financially dates back many years: Napoleon Bonaparte, Victor Hugo and Winston Churchill all advocated continental monetary union. Certainly, economic justification for creating a common currency existed; much of Europe’s trade was intraregional, and unpredictable national currencies placed undue price risk on manufacturers and exporters. Politically, the need to prevent another major war like the ones that engulfed Europe during the 20th century presented a major impetus for union. The 1970s and 1980s saw a few attempts at economic coordination: The Snake and the European Monetary System (EMS) were foreign exchange mechanisms that attempted to keep European currencies within predetermined trading values. But each format failed when individual...