However, this seems to be the only benefit, and it does not outweigh the multitude of costs incurred when setting up an international currency and centrally regulating it in an effective manner. The biggest problem with the euro, a problem that must have been overlooked when it was created, is the fact that using monetary policy to rectify situations in one country will have profound impacts on the developments in other countries. Let's say for a moment that Spain's economy is in the tank. Unemployment is soaring. Businesses are not investing.
Consumers are hesitant to spend.
The ECB would see the impending Spanish recession and would attempt to spur growth by reducing interest rates and increasing the supply of money. If this happens, both consumers and investors most likely would begin to spend more, as they become less inclined to let their money sit in the bank when the rates of return on that money are reduced. However, in this example, we have looked at shaping monetary policy from just one country's perspective. The last thing a central banker would want to do is increase the money supply, as that would exacerbate German inflation. That's a good question, one that would puzzle and confound European central bankers for some time.