The Euro’s Individual Country Pressures – Original Concerns Come to Pass

Wednesday, May 5, 2010

As Europe moved toward a single currency, a chief concern was how to ensure individual countries didn’t rock the boat. Because each country retained its own government and central bank, the worry was that differences could lead to stress within the overall financial system. Europe is now dealing with that situation.

When the Euro replaced participating country’s currencies, the focus of concern was on Spain and Italy. Each had less conservative financial management, visible by their weaker exchange rates. Germany even worried about France. To help prevent loose financial management, fairly strict rules were adopted. But, then along came Greece…

This graph provides an indication of problems to come if the southern countries didn’t tighten up their finances. The economic stress has revealed the weak spots.

However, this isn’t to say that the Euro is in trouble. After its disappointing launch, when it fell to a low of around $0.85, the Euro has strengthened appreciably over the years. Here is how that pattern looks, including the recent drop.

So… The original concerns have come true. Now, it’s up to the European Union to fix the problem(s).

Tags: , , ,

Leave a Reply

You must be logged in to post a comment.

Search

John Tobey on Seeking Alpha

Seeking Alpha Certified

May 2010
S M T W T F S
 1
2345678
9101112131415
16171819202122
23242526272829
3031