Monetary coordination could then move gradually towards the ultimate goal of creating a common currency.

Currency borders generally coincide with political borders, so the creation of a monetary union was expected to give rise to some sort of common polity. Sharing a currency was expected to create a sense of common destiny, and hence solidarity, among the participants.

Risks that emerge in one country can affect the entire currency area. Common banking supervision is needed for strengthening confidence among countries using common financial backstops.

Further, two of the territories under review of the Special Committee share our common Eastern Caribbean currency.

We have a common currency for eight of the eastern Caribbean countries, called the Windward and the Leeward Islands.

Modern electronic technology will not eliminate paper notes and coins soon, so there is still plenty of time to make use of the symbolic value of a common currency. Indeed, even if the eurozone breaks up, each European country could adopt a different currency but retain common symbols.

Making matters worse for Europe s economy was the decision taken decades back to introduce a common currency without a common fiscal policy. Discipline disappeared at the national level in many countries

Why would anyone, especially a European, want to kill a program that so far has helped to save the common currency?

But Kupchan s analysis implies that a common currency can help nation states to build lasting friendships, for he argues that friendship building is most secure after an identity changing narrative takes root, leading to a sense that the nations are like members of a family. A common currency can help to generate such a narrative.

Once the process of euro exit had started, there was no telling where it would stop. The general feeling was that the common currency was doomed.

Europe today has a common currency and the European Central Bank (ECB), which have proven to be bulwarks in defending monetary stability during the financial crisis. Any weakening of these two institutions would cause severe damage to common European interests.

One of the possibilities raised in the discussions on monetary union in the early 1990 s was that a common currency might not mean a single currency. That possibility is not just a theoretical construct in fringe debates two decades ago it is a real historical alternative.

It is hard to see how this ends well. The alternatives seem to be a lengthy and difficult return to growth and employment, or declining enthusiasm for the common currency.

The euro s current problems are, instead, a reflection of unresolved Europe wide and global problems. The common currency is the canary in the mine of the global exchange rate system.

Otmar Issing, one of the fathers of the common currency, correctly stated the principle on which it was founded the euro was meant to be a monetary union, but not a political one. The participating states established a common central bank, but they explicitly refused to surrender the right to tax their citizens to a common authority.

Bad economics easily turns into bad politics. Owing to its flawed design, the common currency now threatens to abort the very project of political union that it was meant to advance.

Ownership of currency is generally proven through possession of the currency.

They set inflation targets at around 2 leaving little room for maneuver when the water got choppy. And, most audaciously of all, the European Union introduced the euro as a common currency.

Perhaps one could interpret the common currency as forcing eventual convergence in policies. But, realistically, loss of support for the euro might come first, precisely because the adjustment mechanisms are so limited.

The euro became the common currency of very wealthy countries, such as Germany and the Netherlands, and much poorer countries, such as Greece and Portugal. It also became the currency of the Finns, runners up in innovation and market flexibility, and of Italy, which lacked both, earning the apt moniker the sick man of Europe.

The European Central Bank (ECB) has taken decisive action to break this vicious circle. Moreover, there is now a consensus that the 17 eurozone countries need a banking union to accompany their common currency.

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So far, enforcement has failed, owing to flaws in the eurozone s foundations. First, fiscal and external account balances are to be kept in check in order to ensure financial stability and sustain the common currency.

But the financial and economic crisis has demonstrated the benefits of euro membership. Ten years after the common currency s introduction, the 16 member euro zone has the world s second most important currency, accounting for more than a quarter of all central banks foreign exchange reserves and having overtaken the dollar as the currency of choice for international bond issues.

By contrast, if the currency union s political deficit is addressed now, first by establishing a fiscal union (a common budget and common liabilities), a real political federation will be possible. And let us be clear anything less than a United States of Europe will not be powerful enough to prevent the looming disaster.

A half century after the foundation of a common market and 15 years after the launch of the common currency, Europe still lacks a united police force and a single foreign policy. Perhaps most problematic, the EU is still home to 28 armies, with 28 commanders in chief, bound together only loosely by NATO.

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(d) Currency exchange adjustments

(f) Currency exchange adjustment

Leaving the common currency would, of course, threaten collateral damage for the exiting country and raise the risk of contagion for other weak eurozone members. The balance sheet effects on euro debts caused by the depreciation of the new national currency would thus have to be handled through an orderly and negotiated conversion of euro liabilities into the new national currencies.

But the eurozone s leaders have not heeded their advice and the consequences are becoming increasingly apparent. Europe now faces a difficult choice either fix this fundamental design flaw and move toward fiscal union, or abandon the common currency.

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