It is hard to find evidence that the euro has generated more economic benefits than economic costs. Some suggest that the euro is forcing governments to behave more responsibly in trimming their budgets.
But the reality is that its creation created “moral hazard” conditions by reducing borrowing constraints on governments that encouraged out-of-control debt formation. As it was, membership in the euro-zone allowed governments overseeing weaker economies to run larger deficits financed with euro-bonds issued at relatively-low interest rates. Greece’s fiscal train wreck shows what happens when credit markets are lulled into underestimating sovereign risk.
Similarly, uniform interest rates across euro-zone countries led to an illusion of uniform risks so that capital was misallocated as seen in now-deflated property bubbles in Spain & Ireland.
Now European politicians want to “throw good money after bad” to bailout Greece & perhaps other southern European governments by trying to spook taxpayers into accepting higher burdens.
One fear tactic is to suggest that the departure of Greece or Spain from the euro-zone could lead to the disintegration of the European Union. But this ignores the fact that many EU member states do not participate in the currency union (e,g., UK, Sweden, Denmark & Poland).
Another scare tactic is that bailouts are necessary to avert sovereign debt defaults in Southern Europe that would unleash financial chaos & a wave of bank failures. However, the biggest risk is that euro-mess will lead to greater centralization of governmental reach & authority in Brussels with more intervention in the economies of Europe.