It would certainly add a lot of financial fees and intermediates to inter-eurozone trade, as european industry tries to insure its supply chain against unpredictable currency shifts.

Have the CB act as market maker in currency swaps, at no charge.

Im not sure if this entirely predictable negative would be larger than the positives, but I do know that massive shocks have a strong tendency to not work out well for the common citizen, so as a solution, it sucks.

If you have the CB buy foreign currency in sufficient volume to match gross outstanding domestic hard currency liabilities (and take any bank that helps a Soros attacker naked short your currency out back to be shot), you won't get massive exchange shocks. Unless you have a massive supply-side shock. But if you have a massive supply side shock, the alternative to an exchange rate shock sucks even worse.

- Jake

Friends come and go. Enemies accumulate.

If instead of the usual exchange-rate-mechanism "snakes" or "bands" each country had a commitment to not allow its currency to appreciate more than x% with respect to any of the other ones, then you would have a system essentially invulnerable to Soros attacks. You can make x% as narrow as you like, though considering FX volatility is about 1% per day, anything narrower than 2 to 3% would require too frequent intervention by the central bank as a market maker (usually seller) in its own currency. Then you can add Jake's idea that the central bank could also be a market maker in currency swaps to help their domestic banks hedge the FX exposure of the domestic import/export sector.

And then you can have actual employment-oriented economic policies in each member state instead of a race to the bottom and games of chicken (always won by the central bank with the undervalued currency) when exchange rates get close to the edge of the "snake".

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa