Will the Euro Currency Bloc Fail?

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Twenty-seven European nations currently belong to the European Union, a loosely-woven partnership designed to empower Europe's competitiveness with the United States, China, and India. Sixteen of the EU's member nations have adopted the euro as their official currency, and five other European states unofficially use the euro.

As continental Europe forged its economic partnership, leaders hoped adoption of a single currency would protect the member states against radical fluctuations in the value of their national currencies and would serve to protect their national credit ratings. In the EU's brief history, the euro has fulfilled members' hopes. Recently, however, precipitous declines in several member states' economies have triggered sharp drops in the euro's value and raised new doubts about the long-term advantage of an international currency.

In theory, the use of a uniform currency facilitates the flow of goods and services across international boundaries, sustaining the Eurozone as the world's second largest economy. Just as importantly, robust economies in the EU's member states maintain the value of currencies tied to the euro-especially in emerging African nations.

History shows that, as long as European nations' economies sustain at least 2.5% annual growth, the euro remains strong in international trading, and all the partners benefit. More recent history shows, however, economic decline in just a handful of member states triggers dangerous uncertainty throughout the European market. Most recently, Greece's profound economic woes have dropped the euro near record lows against the US dollar and the pound sterling.

Although no one anticipates dissolution of Europe's bold economic partnership, widespread economic difficulties cast a very dark, ominous cloud over the EU's prospects for expansion.

Disease and decay at the core

Two of the Eurozone's most important economies struggle in the throes of severe economic crisis, and all twenty-seven member nations feel the ripple effects as the Euro's value declines. Spain's government battles negative growth and skyrocketing unemployment with little hope of relief in 2010. And Greece, its credit downgraded by the leading international investment services, labors under massive national debt and a budget deficit greater than 12% of GDP.

Since the beginning of 2010, both governments have acted aggressively to curtail public spending and increase revenues, but harsh measures intended to reassure EU partners exact a heavy toll from both nations' impoverished workers. In both Greece and Spain, labor unrest has curtailed productivity, contributing to trade imbalances and cutting into government revenues.

Discontent and disarray around the fringes

Especially in the wake of Greek misfortunes, five leading candidates for EU membership have put-off their plans to join.

For at least a decade, European leaders have looked forward former Communist nations joining the Union, naturally increasing the community's trade, and substantially boosting its manufacturing capacity. In the last several years, Poland and the Baltic states have shown their eagerness for membership and have taken steps to bolster their economies to meet the membership requirements.

Especially in the Baltic states, economies grew rapidly until recession set-in during 2008. Now, the most promising candidates battle their own recessions and swelling budget deficits, making their sovereign currencies "good shock absorbers" for declines in the euro, and draining public support for EU membership. Nearly half of all Poles and Czechs now wish indefinitely to postpone consideration of EU membership.