Although Britain opted out of adopting the Euro, London rapidly became the financial center of the continent. In the end, 19 countries would adopt the Euro, creating the Eurozone. Eight others, including Denmark, Sweden and Poland kept their own currencies.
The common currency -- established by the 1991 Maastricht Treaty and launched in 1999 -- effectively put the German Bundesbank in charge. Bonn agreed to the common currency, but only on the condition that everyone kept their budget deficits to 3 percent of national income and held their government debt level at 60 percent of GDP. Those figures matched Germany's economy, but very few of the other states in the EU.
The Maastricht Treaty also transformed the EEC into the EU in 1993.
Deflating one's currency as a tactic to increase exports and stimulate growth during a downturn was no longer an option, and the debt ratio was set so low that few economies could keep to its strictures. When the bottom fell out during the 2008 economic meltdown, EU states found out just what they had signed on for: draconian austerity measures, the widespread privatization of state owned enterprises -- from water and electrical systems, to airports and harbors -- and emigration. Millions of mainly young Portuguese, Irish, Greeks and Spaniards fled abroad.
The European Central Bank -- with its cohorts, the International Monetary Fund and the European Commission, the so-called Troika -- straitjacketed economies throughout the continent, turning countries like Greece, Spain, Portugal, and Ireland into basket cases, forcing them to borrow money to keep their banks afloat while instituting austerity regimes that led to massive unemployment, huge service cutbacks, and rising poverty rates.
The Troika had a neat trick: it shifted the debts incurred by private speculators on to the public, while the Germans spun up a fairy tale to explain the counter-example: the frugal frau.
"The Swabian housewife," lectured German Chancellor Angela Merkel, "would have told us her worldly wisdom: In the long run you cannot live beyond your means."
Except that the debts were not due to the Greeks, Irish, Spaniards, and Portuguese "living beyond their means." They were just picking up the tab run up by the speculators. The vast majority of "bailouts" that followed the crash went directly into the vaults of French, British, German, and Austrian banks. On the day the Greek "bailout" was announced, French bank shares rose 24 percent.