One cannot separate the issue of economic prosperity from politics e.g. as the renowned economists, Besley and Persson have shown, greater `state capacity' allows for a more efficient collection of taxation and so an increased state capacity in the future. Efficient tax raising ability enables more investment in productive public capital (e.g. better rule of law, and more productive citizens via more efficient public administration (including law enforcement and tax collection), health, education, transport and housing investments) and so more efficient tax raising in the future. We undoubtedly live in a world where the capacity of states has been diminished by the growth of large and multinational corporations that are expert at playing one country off against another, avoiding taxation and evading regulations. Thus if the euro is part of a cooperative process that allows for the creation of greater state capacity in Europe and so the greater ability to collect taxes from large and/or internationally mobile corporations then these potential gains can be compared to the evident present day costs of e.g. high levels of unemployment in many euro member states. However, if this is the justification, then I don't see, from a practical as well as social welfare perspective, why a cooperative process doesn't do more to compensate the losers e.g. via transfers/investments within and across countries and within and across generations.

This is simply the wrong question to ask about the labor market. Of course if you make welfare payments low enough and employment obligations small enough then in equilibrium you will have lower unemployment and more people having to put up with low pay and poor working conditions, see e.g. http://www.bbc.co.uk/news/business-37334936 But if this is the reason for low unemployment and high participation rates then it is not the sign of a well functioning labor market. Furthermore, such work often leaves workers below the bread line and so is effectively subsisized by the welfare system thus implying taxation and so inefficiency elsewhere in the economy. Investing in training and workers invariably implies commitment and so a degree of infleixibility. A flexible response to business cycle variability is a clearly a good thing in itself but not if it is at the expense of training and long term accumulation of skills, experience and organizational capital.