This article provides background on Europe and the struggle to maintain a common currency. Europe has around 500 million people and its GDP of $17 trillion is larger than that of the US and three times that of China or Japan. It is the largest trading partner of the US by far, and combined with the US they have almost half of the global GDP.
Europe has some general problems unrelated to the current crisis. Its share of global trade has been declining; it has an aging population which will put a burden on its social welfare programs, and there are imbalances between the north and the south. The northern economies are manufacturing and export based, while the southern economies are service based with substantial trade deficits. It is held together by a common currency but there are only a few, rarely enforced rules which bind them together as an integrated economy.
In order to maintain the common currency it may be necessary to move towards greater economic integration. On the other hand, nothing gets done in Europe without Germany, and its current leadership seems to be more concerned with domestic politics than in providing European leadership. This is for a good reason. Popular support for a more integrated Europe is declining. Euro skepticism is found on the right which is becoming more nationalistic and anti-immigrant, but it is also found within the coalition that forms the political leadership in Germany. It remains to be seen how national politics affect the efforts to provide greater economic integration in Europe. What is certain, is that the failure to resolve the crisis in Europe will create a global economic tsunami that will be difficult to predict and contain.
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