The euro will live for at least another two decades after financial crises since its start forced governments to strengthen its foundations, according to economists surveyed by Bloomberg.
But as the currency celebrates its 20th birthday this year, most respondents warn against complacency - particularly after populist political campaigns across the region publicly toyed with the idea of exiting the bloc.
“By and large, the euro can be considered a success, and if there’s sufficient progress in completing the banking union and capital-markets union, the benefits of using the euro will even increase further,” said Dekabank’s Kristian Toedtmann. “At the same time, it’s important to ensure that economic or financial developments can never force a country to leave the currency union. This calls for further reforms at the national and European level.”
Nearly 80 per cent of respondents in the survey predict the euro will survive - in part because Britain’s messy divorce from the European Union is acting as a deterrent against departure. The economic consequences for a euro member leaving would be even worse than those observed in the UK, said Martin Weder of Zuercher Kantonalbank. Besides, the single currency offers many benefits to its constituents, according to Luzerner Kantonalbank’ Brian Mandt.
“The euro is irreversible,” said Annamaria Grimaldi, an economist at Intesa Sanpaolo. “Leaving the single currency is a costly process which no member country will want to undergo. I believe euro-zone members will foster integration and intra-nation solidarity over the next 20 years completing the European Union.”
SEB’s Marius Daheim is slightly less optimistic governments will succeed, saying that “the past 20-year experience argues for caution.” While current politicians seem determined to ensure the euro will survive, this attitude could change if populists surge in European parliamentary elections in May, predicts Alan McQuaid of Cantor Fitzgerald: “The euro will still be with us in 20 years time - but not necessarily with the same 19 members we have now.”
Greece and Italy are seen as the two most likely candidates to leave, making the euro’s survival in its current shape “a close call”, according to Ideaglobal strategist Everett Brown. But the key to success of the region’s monetary experiment lies between Paris and Berlin. “If France and Germany get fed up with each other then it’s game over for the euro area,” said Alastair Winter, chief economist at Daniel Stewart & Company.