Now it must live in a precarious economic and political environment, where difficult choices, involving direct economic tradeoffs among the European Union's citizens will be made. Already these decisions are generating political conflict. The worst is yet to come. One tradeoff is between the monetary policy needs of different EU countries. By definition, a common currency means a common monetary policy.
Some countries enter recessions while others are booming.
Some experience wage inflation while others face rising unemployment. Their monetary policy needs can and do diverge. Basing its decision on the EU's economic performance as a whole, the European Central Bank can pursue either policies to fight inflation or unemployment. It cannot do both at the same time. Whatever the ECB decides, its monetary policy will hurt some countries while it is helping others, creating the potential for political conflict.