In May 2010, Greece's borrowing binge grew into the world financial crisis, causing a sharp drop of stock prices in countries even outside the EU area, including Japan and the United States. It brought about a collapse of the euro against the US dollar and the Japanese yen. In Ireland and some southern European countries such as Spain, the yield of government bonds showed a sharp rise due to concerns over a ripple effect from the Greek financial crisis, since those countries had already been suffering from the financial crisis stemming from the global financial and economic crises as well as the bursting of the housing bubble. The euro has been experiencing the most difficult period in its 12 years of existence, and it will take some time before it returns to a healthy state because it is the global financial crisis that triggered this European financial crisis, causing long term sovereign risk problems shared among the advanced nations, including the United States and the United Kingdom. It also revealed the weakness of the current euro system in the face of crisis, making reform inevitable.

The delay in preparing a support system was one of the contributing factors that exacerbated the crisis in Greece. The people in Germany and other western European countries value adherence to the rules, and they were therefore upset upon learning that the successive Greek government's free spending policy and its false reports to the EU had caused their own financial crisis, which caused the delay in supporting action. In the end, at the request of U.S. President Barack Obama, who was concerned over the ramifications of a spread of the financial crisis, a huge aid facility was established with a total of 110 billion euro (12 trillion yen at 10 yen per euro) as a bailout to Greece in the beginning of May, as well as 750 billion euro (83 trillion yen) in financial stabilization measures for unspecified southern European nations. The turmoil in the financial markets, however, had yet to subside, even in June.

Penning Criticism of Euro Collapse Theory

Since the Greek crisis, headlines such as "Euro Collapse" and "Euro Demise" frequently appeared in economic weekly journals-floating extreme theories which argued that the euro was, "a single currency with splintered financing," and that collapse would prevail-even though these same magazines had featured articles such as, "Euro to supersede USD and become world's key currency" around 2007. Public opinion has shifted to the extreme end in a mere three years. Which opinion, then, is the correct one?

I have determined that neither of the above opinions is correct, based on my continued study of European monetary cooperation and monetary unions, starting from the period of the European Monetary System (EMS: 1979-1998) preceding the euro system. Being just the right time, the publishing company Iwanami Shoten suggested publishing the revised version of my book "Euro-Sono Shogeki to Yukue (Euro-Its Impact and Outcome)" (Iwanami Shinsho, 2002), and I took the opportunity to write a completely new book "Euro-Kiki no Naka no Toitsu-Tuka (The Euro-a Single Currency in the Face of Crisis)" (Iwanami Shinsho, 2011) which came out in November of 2011. In the new book I discussed the reasons why the extreme theories were wrong, especially focusing on Euro Collapse theories.

On Iwanami Shinsho

"The Euro-A Single Currency in the Face of Crisis" explains the 12-year history of the euro, a summary of the 30-year history of currency unification that led to the introduction of the currency, the euro system, and the roles and limitations of the euro in the global economic crisis and the Greek crisis. The book reconsiders the euro in light of the crisis, then concludes that the euro will not collapse, but rather that the euro system will be improved as a result of the crises, enabling the euro to grow far stronger going forward. Please read the Iwanami Shinsho book if you are interested. I sincerely hope you have an interest in the future of the euro.

If I can state just one point, 330 million people are already using the euro every day, which means immeasurable damage would result if the euro were to collapse. On top of that, the continental-scale economy must be managed effectively in order for Europe to deal with and have its presence felt in the 21st century, when the United States will remain a superpower even as it declines, and the superpowers of the next generation, such as China and India, are emerging as great powers. The euro is the axis in this situation, and Europe cannot afford to let it collapse.

A Lack of Respect for History

In the wake of World War II, Europe formed the EU, created a unified market, and embarked on the world's first experiment of creating a currency before a nation, to follow the trend of the world economy. No one can carry out such experiments except those with an exceptional ability to build a social system. Although it has already been 10 years since the East Asian Community was formed, and the realization of a currency basket and currency unification in East Asia were proposed, absolutely no progress has been made. There is a clear difference between the two. You can only have a superficial discussion of the euro if you lack thoughts on, or respect for, the history.

Although it is a small paperback, I tried to shake the prevailing debate with the aforementioned book and lead it in a productive direction.

The future of the euro and the countries using the euro, however, does not allow for optimism. South European countries will suffer the economic slowdown after the collapse of the housing bubble. Cutting wages and pensions and increasing taxes are causing a nationwide opposition movement. Not only southern European countries, but also the United States and the United Kingdom are suffering serious sovereign risks. I hope to further deepen insights on how Europe will deal with these problems and improve the euro system.