On the other hand though, the Eurozone population pretty much equals that of the US, and surely there are a bit underdeveloped US states compared to the overdeveloped ones, right? So why is the EU bad idea and the US is not?
https://www.dbresearch.com/PROD/RPS_EN-PROD/A_European_trans...
If you mean transfer in a more abstract fiscal sense, not even individual EU states themselves are homogeneous regarding their internal fiscal policies. Some are federal, such as Germany, and some are highly centralised, such as France. Then you have the case of Spain where all 17 autonomous communities (≈pseudofederal states) have a small leeway regarding income tax and must follow the baseline central policy, but two regions in particular—the Basque Country and Navarre—have fully devolved powers regarding taxation due to "fueros", i.e. historical rights.
Almost every economist said in 98 that the euro is a bad idea. And it is for the south of Europe. It's great for the north and Germany especially, but for the south it is and has a killer.
In my opinion, the Euro will ultimately break the current EU.
Luxembourg GDP Per Capita: 114,370
Ireland GDP Per Capita: 83,990
-----
Romania GDP Per Capita: 12,510
Bulgaria GDP Per Capita: 9,850
vs:
New York GDP Per Capita: 93,463
-----
Mississippi GDP Per Capita: 42,411
Yes, NY transfers wealth to Mississippi but the scale of transfer and the relative number of wealthy states vs poor (there's like 5 in the deep south) means the dynamic is completely different. Without significant development in ex-Soviet states I'm not sure how the EU can hold together longterm.
https://tradingeconomics.com/romania/gdp-per-capita
https://tradingeconomics.com/estonia/gdp-per-capita
https://tradingeconomics.com/bulgaria/gdp-per-capita
Rich countries in the north especially Germany put in place policies akin to dumping and were shielded from the effects it should have had on their money by the economic gap with the poorer countries in the south. Southern countries found themselves handicapped by an overvalued currency. Meanwhile politicians in the north refused any form of transfers and keep popularising the idea that southern countries are poorer because they lack discipline.
Currency fluctuations don’t allow for global trade. That’s why after WW2, the Bretton-Woods system was established with fixed exchange rates. After that came to its end, Europe created a new system. Rates were not pegged to gold but to other European currencies (only 2% deviation allowed, 6% for Italy and Britain).
That created a problem for countries that couldn’t keep up with the German economy: Stabilizing the exchange rate was getting very expensive for those countries. Germany started with zero gold reserves after WW2 and now has second place because of this system.
The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system. A lot of money for an economically integrated Europe. Italy gave up some sovereignty over the money supply and pledged not to spend too much.
Even without the euro, Italy had an “overvalued currency” that held it back because it kept devaluing its currency with no economic growth and, yes, no financial discipline (although, of course, Italians don’t lack discipline). The introduction of the euro relieved Italy of much of the burden.
While I agree that there was a lot of populist rhetoric in the northern countries, pretending that the euro is bad for Italy and good for Germany is also populistic. The reverse is true.
If you mean fixed exchange rates (going back to the 70s) are bad for Italy then one can discuss that. (But there’s a lot of economic literature against that – just imagine California and Kentucky had different and free-floating currencies and how trade would be impaired)
> Currency fluctuations don’t allow for global trade.
I’m glade to learn every country in the world with their own currency can’t participate in global trade. Obviously fluctuation is not an issue for trading.
I’m guessing that by the pegging to each other you are mentioning the ECU and European Exchange Rate Mechanism. Its goal had very little to do with trade. It was mostly an attempt to avoid speculation and large monetary fluctuations which made debt management more costly for countries. It collapsed extremely fast and the southern countries were amongst the first to exit the system for reasons which are very close to why the euro is so poor for them.
> The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system.
A strong currency is detrimental to a country export. I’m not even addressing the rest of the paragraph as it doesn’t make much sense. Why are singling Italy by the way? The problem is the same for Spain, Portugal, Greece, in some measure Ireland and even somewhat impact France.
You are also completely failing to address the distortion of the German economy which are a large part of the issues especially after Hartz IV. If you take a look at the German wage levels, saving rates and trade balance, you will see that their money should be much stronger than the euro is.