Is EURO the cause of European Crisis ? - Krugman believes so.

Paul Krugman on European Crisis

Can Europe be Saved ? What are the Causes of the current crisis in Europe ? How did America cope with recession ? Krugman writes about these things in this article. Its a nice read.

Creating a common currency was a good idea, or atleast thats what European elites thought at that time. But did it really make any sense, as the trade between european countries has increased just by 10-15%, not enough - says Krugman. Also due to the diversity in culture and language in the Eurozone, there is not enough mobility of people to fill employment gaps created by other countries. Krugman compares Ireland with the state of Nevada in USA which have similar economies and use a common currency for trade with their neighbours,  but Nevada is supported by the common culture and any unemployment gaps can be filled as people can move in and out easily without any barriers of culture or language, which is not the case with Ireland.

Another problem with a common currency, argues Krugman, is that the indvidual countries can not adjust to the falling/raising Euro. UK is lucky, as it did not fall into the 'Euro-trap' and is free to re-valuate its currency depending on the situation to implement wage cut/inflation/deflation etc.