As I listened to the morning news about the coronavirus crisis, I was reminded of this critique of the Eurozone:
In a recent conference, the distinguished economist Paul Krugman repeated the oft-heard critique that the eurozone is not an optimal currency area. Waltraud Schelkle disagrees with this characterisation, and argues that no country or group of countries represents an optimal currency area – one region or country always loses out from a single monetary policy. But countries can use fiscal, social and regulatory policies to overcome these difficulties. When Americans criticise the eurozone’s currency policies, she writes, they are forgetting the US dollar’s shaky start and the adjustments which had to be made to the financial system in the 19th century.
Why mention the optimal currency area debate in reference to this health crisis? This morning I heard statements like this one:
By contrast, the coronavirus crisis has started to look more like the European migration and financial crises: a symptom of globalization that can’t be held back where it started. The exploding outbreak around the Continent — officially declared a pandemic by the World Health Organization on Wednesday — highlights both the promises and limitations of the European Union: a single, largely borderless market made up of 27 countries, each with their own governments, electorates, bureaucracies, health care systems and, as has become painfully obvious, national interests. For weeks, officials in Brussels and national capitals have called for pan-European coordination. Yet even as Italy, the bloc’s third largest economy, embraces a made-in-China solution — putting the entire country under preventative lockdown — the modus operandi across the EU remains fragmented and reactive.