The proclaimed European Union with its 28 different governments and centralized singular monetary system will have the toughest year in its 24 year existence. The history and development of the European Union has influenced balance between the western and eastern worlds, especially between the United States and Russia. The European Union has acted and helped integrate cultures in a vigorous conflict driven region. However, the more recent events across this region have supported Milton Friedman’s 2001 argument against Robert Mundell. Robert Mundell, the father of the Euro, argued that the region would have a higher standard of living due to the unified currency system. However, Milton Friedman rebutted this argument citing exchange rates which, “these are severely limited by differences in culture and by extensive government regulations, differing from country to country.”
The European Union created an unprecedented situation that had never been attempted by a region in the modern world. This paradigm would bring political and peaceful unity to a war driven region that contained tension between Germany and France for nearly two centuries. However, even the best intentioned plans contain flaws. Economies with flexible exchange rates are able to enhance growth through their currency zones due to natural comparative advantage. Therefore, countries in the European Union who are desperate to export under current economic conditions lose their comparative advantage when the pegged euro appreciates in value. Friedman saw this flaw and maintained his position that “a flexible exchange rate would enable each of them to have the appropriate monetary policy.”
The EU has been vastly successful since its birth; nevertheless the 2008 recession has proven that there is an absence of economic freedom for the European periphery. Economic shocks to the world affect regions and countries substantially differently. After the 2008 crisis, the economic policy that was sought after by the European Union appears to only help few countries. The gluttonous spending habits in Ireland and Greece needed different monetary action compared to the austere German fiscal policies presented in the previous decade. However, the central European bank did their job and implemented monetary policy that helped the masses. From 2008 to 2015, the plight of Europe and the European Union has shown to be at the forefront of all world conflict. How will we see the European Union proceed with differences in the coming years?
The British exit of the European Union (Brexit) is thought to be the first of many dominoes to fall in the soon-to-be collapse of the EU. This vote to leave the European Union will have drastic cultural ramifications for the United Kingdom; however the monetary system will be separated from any political or fiscal decision made in the future. There are six more primary elections in major countries that could change the political and economic culture of the “United States of Europe.” If these countries elect individuals who are against the EU, then perhaps the domino effect will continue. Finally, Milton Friedman (almost 16 years ago to the day) predicted the strife that these nations will go through because of a monetary system that handcuffs countries monetary policies.

The Downward Spiral of the Euro: Milton Friedman’s Economic Prediction to the World