At the time of its launch, many economists predicted that the euro would fail. Martin Feldstein noted that the countries adopting the euro did not constitute an “optimal currency area,” where business cycles and the like would be strongly integrated such that efficiency gains could be realized. Paul Krugman saw trouble in the decade of recession and unemployment necessitated by the convergence criteria of the Maastricht Treaty of 1992, the precondition for adoption of the euro, where budget deficits, debts, and inflation rates all had to be cut at the same time. Both were correct, but what really caused problems was that instead of creating convergence, the introduction of the euro created a great divergence between European economies (see figure 3.1) in almost everything except their bond spreads and balance of payments.

Mark Blyth, Austerity, loc. 217