On January 1st 2009, the euro celebrated its tenth birthday. Since the very beginning, the euro has caused much controversy amongst economists who have failed to agree on whether or not the euro can be deemed a success or a failure. The introduction of the euro left many sceptics worried about whether the euro would benefit Europe. The first few years of the euro were most definitely not without problems, especially with the euro being incredibly low in value against the pound and the US dollar. 2008 however saw the euro at an all time high against the US dollar and is at its highest now, against the pound. It is strange to see that as a result of the current financial crisis, the euro seems to have fought back and the US dollar now is the one to fall in value. The euro has survived ten years and to some it seems to still be going strong.

The European Commission has said that the economy for Europe is relatively strong. The euro had created 16 million jobs resulting in the lowered unemployment numbers in many European countries. With the global credit crunch in mind, some economists see the monetary union as the best thing to have happened now that the economy is officially in recession.

As US interest rates have been cut so has the value of the US dollar against world currencies. The euro has however, received many complaints about the effect of its decreasing value on export competitiveness. However it was not too long ago that the US went through a similar experience to the present ongoing financial crisis. After the US recession in 1991, the whole of Europe was affected incredibly as exchange rates became chaotic. As the value of the dollar plummeted, so did the economic situation in Europe. A financial crisis occurred. Some have said that the monetary union has avoided this chaos from occurring again in this present economical crisis. The mere fact that the chaos of 1991 has been avoided this time around only highlights the success of the euro. The 1991 recession provides us with a look at how the recession may have played out in Europe.

Also, despite the euro’s many controversies, and its having many disbelievers, it is used by 16 European states and by over 300 million people and has so far been successfully managed by the European Central Bank (ECB).

Gordon Brown however believes the euro to be bad in the long term and does not wish to trade in the pound. However as a result of this recession, will the Britons soon be forced to join the euro? The value of the pound is dropping and a monetary union may be one of the solutions. Liam Halligan, Chief Economist at Prosperity Capital Management has however, recently argued against Britain joining the euro, stating that the single currency is a ‘dangerous, unstable system’. Halligan is even sceptic about the euro making it to 20 years.

On the other hand, the role of the euro as a global currency has been deemed to be secure despite many economist’s doubts. Its launch and operation has been deemed successful by many including Professor William Buiter, from London School of Economics, who in a recent interview with BBC One supported the euro and its positive influence on Europe.

Nonetheless, should the fact that the euro has been around for 10 years be a show of its success? Many economists are arguing that euro supporters should probably quit their gloating and perhaps ask the sensible question of whether or not the euro will survive to its 20th birthday. The French finance minister, Christine Lagarde, is quite supportive of the euro, claiming that it is a stable entity, one which will make it so that the European banks will not go the same way as the British banks. Lagarde seems to be very confident that the French banks are nowhere in the same dire situation as the British banks. In a recent interview with Jeremy Paxman, Lagarde revealed that she does not believe Britain to be in the best position to face an economical crisis. Gordon Brown would no doubt highly disagree with this claim. Lagarde however, believes that Britain would benefit by joining the euro zone as it would protect them from ‘huge variations [and] huge exchange currency movements’. Lagarde also brought up the important point that the euro may even take over the US dollar as the world’s reserve currency. Something for the euro supporter to celebrate? A strong euro does however raise the issue of expensive exports, a point brought forward by Paxman. Lagarde however simply replied that the euro has its advantages and disadvantages and one cannot have everything their way.

But can the euro survive the strain of the credit crunch? Portugal, Greece, Spain and Italy seem to be the countries suffering the most since joining the euro zone. Had these countries kept their own currency they might have been able to set their own interest rates as opposed to the ECB. The loss of freedom to do what one wants with their currency is just one of the reasons that Britain refuses to align itself with the euro.

Tony Blair had always considered it a mistake that Britain had refused to join the euro but did Gordon Brown do the right thing by keeping Britain out of the monetary union? Those who do not see the euro lasting another ten years would definitely agree with Brown. Despite Gordon Brown being made to take the fall for the recession, some would support his decision against the euro as had Britain joined the euro, this might have left it in an even more difficult situation financially. Spain and Greece are already witnessing large riots as a result of the unemployment and rise in debts. However some would argue that Spain is not much worse off than other European countries. For instance, is Britain not lending billions of its tax payer’s money to help the failing banks? It seems that now one can only wait to see how the world deals with the global economical crisis before writing off the euro or the pound. Whether the euro will make it to its 20th birthday is another thing left to the financial crisis to decide.