The euro is one of the most recognizable symbols of an integrated and well-functioning European Union. It serves not only as a medium of exchanges and transactions across borders, but also as a promotion of a unified European identity.

However, the recent sovereign debt crisis that arose in the euro zone has challenged the role of a common currency. The decreasing value of the euro has affected a number of European countries, including Greece, Spain, Portugal, Ireland and Italy. 16 out of the 27 European member states are using the euro as their official currency. Because these countries share a unifying monetary policy but are unable to make independent decisions to cope with the ongoing crisis. Thus, EU member states face a dilemma—to remain in a unified, but inflexible monetary policy or to tackle their existing economic challenges independently.

According to the 2008 Nobel Prize laureate in economics Paul Krugman, a fully integrated fiscal and labor market is a must to ensure better implementation of the euro. Drawing a comparison between Spain and Florida, both of which have experienced a housing boom and the following bubble burst, Krugman noted that Spain cannot simply implement monetary policy to devalue the euro in coping with the public finance crisis. What is more, its worsening level of unemployment will not be lessened by free labor flow or social security net support. The recent depreciation of the euro is a market response to the debt crisis, and also an exposure of the incongruity between the euro as a transnational currency and the existing institutional shortcomings due to the lack of a powerful central body that coordinates the economic management of different sovereign states.

In the context of the ongoing debt crisis, Sweden, one of a few member states that hasn’t adopted the euro, is enjoying the popularity of its once not-so-desirable currency, the krona. Sweden’s sound public and private finance, as evidenced by its small budget deficits, manageable public debt and stock market, strengthens investors’ confidence in the krona.

Vedika Birla ’13 originally from India, a country with a flourishing economy, recognizes the potential domino effects that the euro can bring to the EU. She is especially concerned about the currency’s value, which has further economic implications well beyond EU borders. The weakening of the euro may negatively affect other countries’ value of foreign reserves, especially countries with a large share of euro reserves.

While we can hope the crisis will soon be over, one question remains—who will bail out these sovereign states that are, to an extent, restricted by the euro?

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