Paul de Grauwe examines how participing in the Euro makes countries that much more vulnerable to assault in the financial markets,
because they now lack control of their own money:
When entering a monetary union, member-countries change the nature of their sovereign debt in a fundamental way, i.e. they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries’ sovereigns into default. In this sense member countries of a monetary union are downgraded to the status of emerging economies. This makes the monetary union fragile and vulnerable to changing market sentiments. It also makes it possible that self-fulfilling multiple equilibria arise.
What he doesn’t examine in his paper, but what’s clearly is happing as well is that in a monetary union like the Eurozone, such crisises are vulnerable to cascades. The rescue of Ireland and Greece makes Spain and Portugal weak, which means they need to be bailed out which made Italy look worse and France a bit wobbly… Before you know it even very safe countries like Holland or Germany are brought down. Which makes it all that much more important that the Eurozone learns to deal properly with these crisises.