Why do leading economists argue that all small European economies should join the Euro?

Paul Krugman, the Nobel Prize winner for economics, has recently argued in the Swedish Sydsvenskan that all small European economies should join the Euro: “I think the lesson of the crisis is that one should join the euro…. For good or evil should probably all the small European countries join.”

The 1st January 2009 marked the ten year anniversary of the Euro, but Denmark and Sweden are the only small, open EU economies not seeking to join in the immediate future. Why do leading economists, such as Klugman, argue that all small European economies should join the Euro? A DIIS Brief surveys four main economic arguments related to the global economics crisis and new evidence emerging from studying the past 10 years of the Euro:

(1) That membership of the Euro provides protection from the worst effects of the global financial crisis;
(2) That the positive trade effects are conclusive;
(3) That Foreign Direct Investment (FDI) has been effected by the Euro, and;
(4) That relative Euro-zone economic performance has been understated over the last 10 years.

It concludes that Danish and Swedish membership of EMU and the Eurogroup would help contribute to the role of the EU as protection against the worst excesses of globalisation and help build more sustainable global financial architecture.