Imagine that there was no euro and that the southern countries had retained their own currencies Italy with the lira, Spain with the peseta, Greece with the drachma, and so on. Would these countries today have an inflation profile more like the United States and Germany or more like Brazil and Turkey?

They see how countries like Denmark that maintained their own currencies have been forced to raise interest rates to defend their exchange rates when the United States Federal Reserve and the European Central Bank are cutting interest rates. They see how, if there was still a lira or a peseta, they would be experiencing capital flight.

Free capital mobility allowed surpluses from large savers such as Germany to flow to capital importers such as Spain, while the perceived elimination of currency risk served to aggravate such flows. To investors, Spanish housing assets seemed a great investment, because the forces of economic convergence unleashed by the euro would surely push up their prices and because there was no peseta that could lose value.