In 1999, 17 nations agreed for a common currency. In modern world, currency is the medium of exchange for goods and service which is equivalent of barter system in old days. The countries signing the Euro agreement saw it as opportunity for free trade, travel, labor mobility and also a way for mutual cooperation between these countries. They agreed for common interest rate, inflation target etc.
But the basis of formation of Euro zone had flaw in it. Although they agreed for common interest rate, the taxation for individual countries was decided by respective governments. Countries like Greece, Italy, Spain never agreed for higher tax rate. Their citizens enjoyed more relaxed work culture through forming unions and the government agreed to their demand. In last decade unit labor cost in Germany has declined by 3 percent where as in France, Greece, Spain it has increased by 20 percent and in Italy it has increased by 40 percent. With the global…
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