Standards don’t always work, but why?

Standards don’t always work, but why?

1952 was the time when European countries decided to form a new parliament that would oversee the general political and economical situation in the countries that would join. What started out as six countries has now become a coalition of 28 countries and the biggest market in the world.

The specific standard that I will explore today, in relation to the EU, is the introduction of the Euro in 2002. This new currency was supposed to ease the transition of funds between countries and therefore promote free trade between these countries. To begin with, the Euro replaced 12 national currencies and since 2002 six more countries have joined.

This sounded like a great idea at the beginning, and it certainly looked like it. The only issue is that if these countries would unite under a common currency, the single nations would loose some of the freedom they had before on the economic policies for the country. For example, countries under the euro cannot regulate their own interest rate or print more money in case it’s needed. This happens because the change in one country have an effect on every country, therefore to avoid confusion, the EU decided to maintain control over monetary policies regarding currencies and let nations do whatever they wanted outside of those limitations.

As you might imagine this poses various problems, because every country has a different culture and spends money in a different way, a unified currency is not effective as it standardizes not only the currency but also the countries across the board, something that some countries obviously didn’t take into account.

Greece being the most recent case and Italy now starting to create noise about leaving the euro is creating panic in the EU. Because the sudden change of currency for either of these countries would certainly benefit them as a single unit but would hit the rest of the EU very hard as the European market would be flooded with euros that are no longer valid in a country, raising inflation rates to the roof and creating a difficult situation for the BCE (European Central Bank) to find a way to stabilize the currency.

The main issue here is if a big country like Italy pulls out of the Euro, the whole EU will collapse because even though Italy its not performing splendidly lately, it is still one of the G8 countries and a vital component of the EU.

In my opinion, in this case standards didn’t work because they tried to simplify something, which sounds absolutely reasonable, but the countries that joined did not take into account the differences between the communities that would join the currency. Everyone looked in their own yard without thinking about what the Neighborhood was like.

The fact that this Standard was a voluntary consensus, as the EU did not impose it on any country, the would join willingly, it shows how if very different variables join the equation, it will eventually be impossible to balance it out.

Niccolò Bertini