Euro@25: Where has the euro area been? Where does it go from here?

A review of the first 25 years of the euro suggests that mistakes were made. Yet, the ECB has also been remarkably adaptable under difficult circumstances. Improvements to the resilience of the euro area are possible. This paper looks back over an eventful quarter century and offer a peak into the euro area’s possible future challenges.

The euro must, it seems, live with the possibility that it might not survive. Even before the single currency became a reality, scepticism was rife about the novel experiment of sovereign nations binding themselves to a single currency.

The good news is that the series of large shocks since 2008, namely the GFC, the Euro Sovereign Debt Crisis (ESDC), Brexit, the global pandemic of 2020-2023, namely COVID-19 pandemic and the ongoing Russian invasion of Ukraine, have not seemingly changed the prospects for the demise of the single currency. Indeed, the EU, which consists of the euro area plus several countries which have retained their currency, most of which are expected someday to join the common currency area, continues to receive not only high favourability ratings but manages to generate optimism about its future. This suggests that the euro has, so far, met the test of resilience. That said, this paper proposes that policy makers should not adopt the position that, in the case of the euro, “if it ain’t broke, don’t fix it”. A review of the first 25 years of the euro suggests that mistakes were made. However, improvements to the resilience of the euro area are possible. What follows then is a look back over a highly eventful quarter century as well as a peak into a possible future scenarios when the euro will hopefully celebrate a half century of existence.