Financial Times, The National Review, The Irish Times, and many others have reviewed the new book "Euro Tragedy: A Drama in Nine Acts” by Ashoka Mody. The book provides a fascinating history of the euro not only as a monetary unit, but as a political tool for the unification of a diverse set of nations under a single banner. Mody argues that, from its start, the euro was flawed both in concept and design. A monetary union in the absence of a fiscal union and lacking mechanisms for distributing the impacts of booms and recessions across countries was bound to lead to conflict. Mody points out that adoption of the single currency has, in the post-recession years, led to the opposite of what the framers of the European Union wanted—fragmentation and discord rather than continent-wide integration.
Will the next act in the drama of the euro be its final act? Mody suggests two possible scenarios, one realistic and one optimistic. Realistically he suggests that we can expect the Eurozone will continue to move from crisis to crisis, with perhaps the most indebted nations eventually opting out of the single currency. In the more optimistic case, European leaders have the courage to support new policies that “improve the functioning of the eurozone. These include scrapping the fiscal rules, creating mechanisms for predictable and orderly default on public debt to instill greater discipline in debtor governments and their creditors, and changing the ECB’s mandate to require that reducing unemployment be an objective of monetary policy on a par with maintaining price stability.”
Ashoka Mody is the Charles and Marie Robertson Visiting Professor in International Economic Policy and Lecturer in Public and International Affairs at the Woodrow Wilson School of Public and International Affairs. Previously, he was Deputy Director in the International Monetary Fund’s Research and European Departments. He was responsible for the IMF’s Article IV consultations with Germany, Ireland, Switzerland, and Hungary, and also for the design of Ireland's financial rescue program. Earlier, at the World Bank, he managed Project Finance and Guarantees and the Prospects Group. He has advised governments worldwide on developmental and financial projects and policies, while writing extensively for policy and scholarly audiences.