7. Reﬂections on the future of the euro 7.1 INTRODUCTION In this concluding chapter we review the performance of the euro area and consider the medium to long-term prospects of the new currency. The euro is close to its tenth birthday and to date its record is in many ways at least respectable. But what judgements will be passed in another 10 years, or on the ﬁftieth anniversary of the euro’s launch? Of course, we can only be speculative in trying to answer such questions. However, we do have some theoretical terrain on which alternative futures for the euro and euro area might be mapped. In what follows we sketch out three possible scenarios using optimum currency area theory and some other theoretical and empirical considerations. Each scenario gives a ﬂavour of what, in generalized circumstances, might happen to the euro. Our speculations are just that; they are not predictions of what will happen should certain events come to pass. However, before we discuss possible alternative futures for the euro, it will be helpful to review the broad parameters of the development of the euro area to date. 7.2 7.2.1 THE EURO IN ITS FIRST DECADE The Euro’s Launch and the Behaviour of the Euro Exchange Rate As noted in Chapter 3, the Maastricht criteria that determined the eligibility of the original euro-area countries to adopt the new currency at its 1999 launch were, as Paul De Grauwe notes in our interview with him at the end of Chapter...
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