Eurozone In Crisis And Euro In Trouble

The Euro has been declining against most major currencies at a breathtaking rate of decline. There are two main reasons. First, there’s a monetary crisis which is similar to what we’ve been going through here in the states. Second, there’s a “unity” problem in 15 countries that use the Euro currency. The Euro countries are a union of countries that came together, beginning in 1998 to hopefully find strength in unity. Their initial thinking was that by uniting under a common currency, they would gain strength in their ability to compete against the USA and other large governments/currencies.

Countries that make up the EUROZONE - All united under the EURO

Chart source - Wikipedia

Their strategy seemed to be paying dividends until now. The EURO had shown some great appreciation against the USD moving from .80 to $1.60, nearly doubling in value against the USD.

Lately, it’s become evident that the “all for one, one for all” attitude of the EURO currency countries may be starting to wane. This is because as each individual country’s banks start to run into problems, the “UNION” or the ECB is supposed to stand behind them financially and help. It is not clear whether a country with a strong fiscal balance sheet is going to be willing to support “the weak sister”. This interplay between strong countries and weak countries is what is causing problems for the EURO against other countries.

Recently the EURO has been in a freefall against many of the major currencies. When or how this “unity” issue will be resolved is a true unkown. Some have even speculated that it could be the end of the EURO, as countries would rather be in control of their own destiny instead of being part of the union.

Posted in Categories: Contributor, Economy, Eurozone, External Research, Forex, USA.

Subscribe by RSS Subscribe by Email