Eurozone to face new challenges

The eurozone entered its second decade this year, but it immediately faces financial problems in both Greece and Spain, which has resulted in a warning that the monetary union could be dragged down by these two countries.

Forecasts like this are not new, although European Central Bank Chairman Jean-Claude Trichet has dismissed rumours from the financial markets about Greece ever leaving the eurozone as “absurd”.

Europeans have spent decades trying to integrate both politically and economically which has resulted in a single currency being created.

The Maastricht Treaty on the European Union set out a high standard for membership of the EU membership, noting that no member should quit over reckless decisions once they have entered.

The eurozone has made it through its first decade and proved that a fixed exchange rate mechanism is workable under the trend of rapid globalization. Fixed exchange rate mechanisms are not infallible, and the global financial crisis has also exposed its vulnerability.

The eurozone cannot continue to be guided by rules based on the high standards of the Maastricht Treaty, and there are calls for the framework to be changed. The authorities have also been urged to design exit mechanisms to let those who are lagging behind quit the union.

With the Eurozone still being under the grip of the global financial crisis, there is an undeniable need for stark changes. For those who have called for the establishment of a Common Asian dollar, the eurozone's ability to tide over its difficulties will be a living reference book.