The euro was a mistake. It was supposed to be a symbol of unification, but in the end it delayed European integration, said Nobel Prize laureate Paul Krugman. According to him, Europe did not meet and still does not meet the criteria for a well-functioning single currency.
"I remember when it was discussed, I thought, why are you doing this, after all, skeptics like me warned about the euro crisis," said the economist, adding that the problem arises when it is necessary to adjust relative wages and prices.
"It will be much more difficult to achieve this if you have a single currency – you have to do internal devaluation, you can't do ordinary currency devaluation," he explained.
He cited Spain and Iceland as examples. The latter, according to him, "for some time was an exemplary example of the financial crisis." Both countries had huge capital flows that suddenly stopped. The difference comes in the currency – Spain is in the Eurozone, while Iceland has its own currency (Icelandic krona).
"Iceland achieved relative price adjustment in essentially one day, while it took Spain five years of high unemployment," the researcher said.
Paul Krugman said he was and still is skeptical about the euro. He assessed that there were "some advantages to the simplicity of a single currency, but also a significant loss of flexibility". According to him, the euro was supposed to be a symbol of EU unification, but "in the end it probably delayed European integration".
"I thought the euro was a mistake," he added, explaining that leaving the eurozone was also a problem – no one had done it before. "I understand that in a sense it is irreversible," the economist said.
"Basically, the experience confirmed all fears and did not justify optimism," concluded Paul Krugman.
