For Ireland (a small economy) the move from the Punt to the Euro was critical in preventing:

1. Ruinous interest rates (15%) largely driven by unreal perceptions of the Irish economy by important foreign actors

2. Extreme fluctuations in exchange rates - largely driven by large financial speculators gaming the system for personal gain

3. A decline in business investment - driven by the twin uncertainties above - individual businesses crave interest and currency stability as it improves predictability, planning and budgeting and reduces uncertainty over external factors over which businesses have no control - exchange and interest rates.

The Euro had a hugely positive impact on economic growth and investment by reducing those uncertainties and the ability of third parties to game them.  The major downside of the Euro has been inappropriate interest rates and a Eurowide failure of bank regulation.

For a small economy like Ireland to go back to its own currency would be an invitation to global capital to basically take over the country as no Government/Central bank would be in a position to control the speculators...

Index of Frank's Diaries