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Krugman explains that having a transnational currency does have obvious benefits — it makes doing business a lot easier in Europe. But, he says, there's also a downside: By giving up its own currency, a country also gives up economic flexibility and the benefit of having its own federal government back it up in times of economic trouble.

Krugman points to the economies of Ireland and the state of Nevada as examples. Both depend on exporting as a major source of revenue (Ireland to other countries, Nevada to other states)