The crisis has revealed the serious asymmetry of unpunished fiscal profligacy in euro-area member countries and painful austerity in euro-area applicant countries. This column argues that the stakes are now very high and euro-area members ought to change the entry criteria to make them more reasonable.

The crisis has broken the close correlation between differences in expected interest rates and the euro-dollar exchange rate. This column attributes that to the sharp increase in risk aversion triggered by the collapse of Lehman Brothers. It argues that fluctuations in risk aversion explain the path followed by the euro-dollar exchange rate since the beginning of the financial crisis.

This column says that the enlargement of the EU from 15 to 27 members made the EU more competitive and it is therefore better placed to face the current crisis. It says that both old and new member states enjoyed major benefits from eliminating trade barriers, gradually allowing higher cross-border labour mobility, promoting financial integration, strengthening institutions, and significantly reducing political risk.

What was the payoff to adopting the euro? This column says that financial integration, measured as bilateral bank holdings and transactions, increased by 40% more amongst eurozone members than countries that stayed out. It attributes that growth to the euro’s introduction eliminating exchange rate risk and coinciding with financial regulatory harmonisation.

This column analyses the impact of the euro’s adoption upon European firm’s productivity and international competitiveness. The euro produced significant competitiveness gains for relatively small economies such as Finland, Belgium, and Austria. If Denmark and Sweden had joined the euro area in recent years, they would have enjoyed gains equivalent to a 5% across-the-board reduction in trade frictions.

This column presents Marty Feldstein’s views on the euro. He suggests that tough economic conditions in Europe may cause substantial economic policy disagreements among the Eurozone countries and that one or more countries might actually withdraw from the Eurozone.

The financial crisis is now hitting several of the non-euro-area new member states hard, highlighting the shortcomings of Europe’s monetary architecture. Crisis management in the euro area has had the unintended consequence of putting non euro-area new member states at disadvantage. Without decisive action, a new political and economic divide within Europe may emerge.

Trade among euro members has increased 10-15% since the introduction of the euro, a far smaller effect than estimated prior to the currency's introduction. What explains the discrepancy between the European experience and previous history? This column explores the difficulty of explaining the difference.

This column looks back at the first ten years of the euro, from the uncertainty surrounding its adoption to the one caused by the current crisis. In between, the euro proved a resounding success. It is worth remembering the magnitude of the original challenge in order to use the crisis as an opportunity to strengthen European governance.

Iceland is undergoing a traumatic financial crisis. This column argues that the main anchor for its recovery strategy should be EU membership and entry into the euro area.