When the euro was established in 1999, prices were translated from the mark, franc and other currencies into euro at prevailing exchange rates. (Greece joined the euro zone in 2001, giving up the drachma.)
National prices reflected differences in labor costs and efficiency across countries, but owing to a variety of social and demographic conditions, productivity improved more rapidly in Germany and other northern countries. Making goods in the South became too expensive, and Greece and others could no longer export enough to pay for imports.
Without a single currency, the values of the drachma and other Mediterranean currencies would have fallen against the German mark to restore competitive balance.
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