Given the difficulty of rolling back the financial clock and the constraints of the Single Market, it is clear which way European countries will move. One already sees a shift in public opinion toward euro adoption in Denmark and Sweden. Poland has reiterated its commitment to adopting the euro. Hungary is certain to do likewise.
Obviously, the crisis will be economically and financial challenging for Eastern Europe. It will heighten the difficulty of meeting the convergence criteria for euro adoption. But it will also heighten the will to succeed.
The implication, then, is a larger euro area, not a smaller one, as more countries see the writing on the wall. Indeed, there are already signs of countries not even in the EU, notably Iceland and Switzerland, contemplating accession as a step toward adopting the euro and resolving their financial dilemma.
The one exception is probably Britain, whose currency is used internationally as a legacy of its history. In any case, Britain has always had one foot in Europe and one foot out. It is conceivable, therefore, that Europe will have two currencies, the euro and sterling, in the long run. But having three currencies, much less three dozen, is out of the question.
Barry Eichengreen is professor of economics at the University of California, Berkeley.
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