One surprising thing about Britain’s vote to leave the EU is that Britain’s economy has been doing better than a lot of European countries. Unemployment in the United Kingdom has fallen to 5 percent, its lowest level in a decade. In contrast, the average unemployment rate among countries that (unlike Britain) have joined the EU’s common currency, the euro, is still above 10 percent.

And many economists argue that’s not a coincidence — that poor policies by the European Central Bank have systematically weakened growth in countries that have adopted the euro.

A new paper from economist David Beckworth makes the case that the economic woes of eurozone countries like Spain and Greece can ultimately be traced back to the euro itself. He argues that other problems in those countries, like their problems with high debt, were made worse by the ECB’s tight-money policies.

This argument has huge implications. It suggests that without reforms, eurozone countries could continue suffering from slow growth and abnormally severe recessions for decades to come. That, in turn, will fuel public resentment against the EU and increase the danger that other countries will follow the UK’s lead.

And the euro isn’t just a mistake — it’s a mistake that’s going to be hard to fix. Any country that tries to leave the euro risks triggering a financial crisis. And while deeper economic integration could help to mitigate the euro’s problems, the political obstacles could be insurmountable. Brexit wasn’t great news for the future of the EU. But the common currency is likely to create much bigger headaches for European leaders in the years to come.

The eurozone has been an economic disaster area since 2008

Central banks like the US Federal Reserve and the European Central Bank play a critical role in modern economies.

Money is an essential fuel for economic activity, and it’s the job of a central bank to supply enough to allow for robust economic growth. If they supply too much, they produce inflation. Producing too little can tip the economy into a recession — or make an existing recession worse than it would otherwise be.

The greatest example of this latter problem was the Great Depression of the 1930s. When economies around the world began to contract in the early 1930s, central banks should have responded by flooding the market with extra cash. But the US and other countries were still on the gold standard, limiting their flexibility. The result: a massive global depression that cost millions of jobs and contributed to the rise of Adolf Hitler.

Since 2008, some eurozone countries have been suffering from economic conditions that rival those of the 1930s. Spain’s unemployment rate is 21 percent. In Greece it’s 24 percent.

The conventional explanation for these countries’ struggles is that they had racked up too much debt ahead of the 2008 crisis. There’s some truth to this in Greece. But it doesn’t fit the situation in Spain, which had been paying down its debt and reached 36 percent of GDP — about the same as the US level at the time — by 2007.

Once the economic crisis began in 2008, the debt burdens in Spain and other eurozone countries soared. And countries with the highest debt burdens appear to have suffered from the slowest growth.

But Beckworth finds that this relationship between high debt burdens and slow growth was stronger for eurozone countries. For countries outside the euro, high debts didn’t necessarily correlate with slow growth.

And Beckworth argues that this is because countries outside the eurozone could support their economies with looser money. In contrast, the only option for Eurozone countries was to prop up their economies with massive government spending. The countries with the highest debt levels were least able to do this, causing them to suffer the most from the recession.

That’s just one example Beckworth points to as evidence that the eurozone made the recession worse. One of the biggest blunders, he argues, was the ECB’s decision to raise interest rates — a contractionary policy — in 2011. The eurozone soon tipped into a double-dip recession.

Leaving the eurozone could trigger a financial crisis

A key step to escaping the Great Depression was to leave the gold standard, which the United Kingdom did in 1931 and the United States did in 1933. Unshackled by the tie to gold, central banks were able to devalue their currencies and stimulate economic growth.

"If you look at the US, we see lots of indicators suddenly turn positive immediately upon devaluation" in 1933, says Scott Sumner. He’s a colleague of Beckworth’s at a libertarian think tank called the Mercatus Center and the author of a new book on monetary policy and the Great Depression. Sumner says that after the US left gold and devalued the dollar, stock prices soared. The value of commodities soared, suggesting that people were expecting a jump in economic activity. Economic output began to rise almost immediately.

In principle, a country like Greece or Spain would enjoy a similar large economic boost if they left the overvalued euro and adopted their own currency. They’d be able to devalue the currency and thereby increase demand for exports.

But Sumner argues that this won’t be so easy in practice, because any announcement of a switch to a new currency would precipitate a financial crisis.

Switching from euros to drachmas, the old Greek currency, would require producing new drachma notes and coins, a process that takes weeks if not months. But the moment the Greek government started producing the new cash, people would start pulling their euros out of Greek banks, fearing — correctly — that they’d soon be converted to drachmas and lose their value. This massive bank run could bring the Greek economy grinding to a halt, as people hoarded euros and banks struggled to stay in business with their deposits plummeting.

Fixing the euro won’t be easy

So exiting the eurozone isn’t a great option. But fixing the eurozone’s problems won’t be easier either.

Economic theory says that shared currencies work best in areas that are economically and politically similar. In the United States, for example, we have a shared language, no restrictions on moving from one state to another to find work, and a shared identity as Americans.

We also have a federal government that is responsible for the bulk of government spending. This spending acts as a kind of economic shock absorber. If Texas is booming while Michigan is struggling economically, the federal government taxes rich Texans to provide unemployment, Medicaid, and Social Security benefits to people in Michigan (and everywhere else). That reduces the strains on the Michigan state budget, making it unlikely that Michigan will suffer the kind of fiscal crisis that has struck many European countries in recent years.

In principle, then, the solution to the euro’s problems is to create a "United States of Europe" with a shared, Europe-wide budget that could help to cushion economic shocks within the EU. The problem is that no one in the EU seems interested in making the leap.

Sumner points to the re-unification of East and West Germany after the fall of the Berlin Wall in 1989. The two German states had been a single German nation before World War II, but thanks to communist mismanagement, West Germany had become much richer than the East. The result: West Germany wound up spending hundreds of billions of deutsche marks each year — for decades — to help bring East Germany’s economy and public services up to Western standards.

Sumner argues that European unification would amount to the same kind of effort on a vastly larger scale. Germany and other wealthy countries could wind up bearing an even larger fiscal burden paying for public benefits for Greeks and Lithuanians than West Germany bore in the aftermath of Germany unification. And Germany doesn’t have the kind of cultural similarities to countries like Poland or Portugal that West Germany did to East Germany.

"I just don't think the Germans would accept it," Sumner argues. "They would just veto it. It’s a pipe dream."

Can the ECB get better at its job?

So countries that have joined the euro don’t have a lot of good options. Breaking up the currency bloc would trigger a massive economic crisis. Deeper integration is likely to be blocked by the objections of rich countries. So Europe may be forced to try to live with the flawed institutions it has.

The key institution here is the European Central Bank. Beckworth argues that its tight money policies have worsened Europe’s economic weak economy ever since 2008. It finally started to do more to support the economy in 2015. But with eurozone inflation well below the ECB’s 2 percent target, the central bank could be doing more to support the recovery and bring down the eurozone’s sky-high unemployment rate.

The larger question is whether the ECB will be willing or able to do enough when the next recession begins to prevent it from becoming a full-blown economic crisis. With inflation and interest rates very low, it may take extraordinary measures — like a dramatic expansion of the "quantitative easing" program it announced last year — to drag Europe’s economy out of a recession.

And here the EU’s fractured political culture may be a big problem. The ECB is based in Frankfurt, and has close ties to central bankers in Germany. They’ve been critical of even the modest stimulus efforts the ECB has attempted over the last year, and we can expect them to be skeptical of taking stronger actions in the face of the next downturn.

The danger, then, is that the ECB will be caught flat-footed once again, and Europe will go through another wrenching economic crisis. That will inevitably boost the profile of populist and Euroskeptic figures within the EU.

What Brexit means for the pound