>>>>>>>>>>http://www.iht.com/articles/2009/03/01/europe/union.php
>>>>>>>>>>
>>>>>>>>>>Snippet:
>>>>>>>>>>
>>>>>>>>>>The leaders of the European Union gathered Sunday in Brussels for an emergency summit meeting designed to tamp down the centrifugal forces unleashed by the global economic crisis that threaten to spin the bloc - and its single currency - apart
>>>>>>>>>
>>>>>>>>>These are difficult times. The EU is not a country and even though there is a 'EU government' its power is limited as how to enforce policies to countries. Yes there is the question of leadership, but the situation would have been far worse without the EU. One thing is certain tyhe Euro has protected a lot of countries from huge devaluation of their currency (e.g. Ireland). This is exactly the reason why other, mostly eastern european countries are in trouble: They do not have the euro. In order to be eligible, a country has to be in complience with some economic rules. And in these hard times, that will be impossible.
>>>>>>>>>
>>>>>>>>>So what to do? Protect your own market or help out the ones in dire straits? In essence this is the same question every nation is wrestling with. But in the case of the EU, with its unique form of 'government' it is esspecially challenging.
>>>>>>>>>
>>>>>>>>>Time will tell..
>>>>>>>>
>>>>>>>>How having the euro could help Eastern Europeans? Their problem, as I understand, is bad loans that they can't repay and even if they join Euro they would be still unable to print it. By the way, Italy and Greece are in big trouble too, and they have Euro.
>>>>>>>
>>>>>>>How about avoiding huge devaluation of their national currency against all major other currencies ? (Like what happened in iceland)
>>>>>>
>>>>>>I don't question it. My point is that it does not cover the major problem specifically threatening East Europe. Bad loans cannot be repaid both with or without devaluation. They are not denominated in local currency so currency rate is not relevant.
>>>>>>In regard to Iceland, massive devaluation was secondary result of huge asset losses, i.e. it was a consequence, not the reason for their troubles.
>>>>>
>>>>>Sure, but if they were using the euro, the devaluation would not have happened. The euro brings contributes to economic stability esspecially to smaller and economic weaker countries.
>>>>
>>>>Absolutely, using the euro could exclude devaluation. All other probems would be still in and this makes economic stability very questionable. I am very far from considering central government ability to manipulate currency (i.e. print more) as something contributing to economic success.
>>>
>>>If a government has to deal with one thing less, that always is a bonus. Sure other economic problems would still be there, but at least this one (a very important one IMO) is out of the way.
>>
>>In regard to this specific issue (i.e. single currency) it would mean that country government would deal with one thing less and central European government (whatever the structure) would deal with one thing more; i.e. accepting more members with weak financials would make ECB job harder to maintain euro stability. Euro strength (or weakness) does not come from heavens, it is defined by financial strength/weakness of member economies and initial guidelines which countries are eligible pursued goal of having strong currency. Take the guidelines out and the whole idea of single currency becomes questionable, in economic sense at least. As it stands now, weaker (economically) states want to join stronger single currency. If single currency becomes weak then stronger (economically) states will see incentives to get out of the system.
>
>But there were economically stronger and weaker countries when the euro started, too. Obviously the more robust countries saw an advantage of scale that more than offset the disadvantages. "The strength of the pack is the wolf, and the strength of the wolf is the pack."

Initial eligibility criteria made impossible for weak economies to join Euro, i.e. only robust economies could have it. What happened later was a political process compromising economic policy and sacrificing long-term economic stability to short-term political gains, i.e. South European countries got relaxed criteria to join Euro couterbalancing some Euro political setbacks in North.
Advantage of scale is certainly good in robust markets, when markets get sour it is called bad exposure. One specific example (not quite related, but still about scale/exposure), US-based banks are suddenly in better shape (unimaginable, but ...) than European counterparts because they don't have exposure to East/South European bad loans.