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We have talked about the future of the Euro in class many times already, but I found this article interesting because I think it shows that our bleak outlook for the Euro could be pretty accurate. Even with the Greek bailout, the Euro is projected to continue to drop. With Portugal and Spain looking like they may be in trouble, it could hurt it even more. In addition, according to this article, the U. S. is on the faster path to recovery and if they begin to raise interest rates first, could strengthen the dollar even more against the Euro. How much patience will countries like German and France have if the currency struggles even more?
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I think Germany and France have to have a lot of patience. Especially Germany, a manufacturing superpower. They actually could benefit from a very weak Euro, as long as they don't need to borrow money, as their exports will be relatively much cheaper. France isn't in quite as good a position, as a major importer, but the transaction costs attached to leaving the EU are tremendous and that as long as the whole EU zone suffers France can still import within the Eurozone at low cost. Even is Greece collapses I'm beginning to believe that the Euro may still be favorable to the big powers.
ReplyDeleteI'm with Tommy on this one because I find it hard to believe that Germany and France really have a better alternative to the Euro. It's unfortunate that the Euro is hurting so much, and it looks as though it will only get worse, but they have kinda been put in a no-win situation having to sit it out and only hope that the PIIGS can somehow get out of their financial woes enough to help the Euro get back to its previous strength.
ReplyDeleteI agree with Tommy and Jim. Germany and France would probably be in worse shape if they chose to return to their previous currencies. Not to mention the international fallout that may result from that choice. Unfortunately, they will have to be incredibly patient in the upcoming months/ years especially considering the looming crisis in the other 4 PIIGS nations.
ReplyDeleteI think that the US is recovering well and that the interest rates should rise. It will only strengthen the value of the dollar, however we know that the Fed won't do that for a while at least...
ReplyDeleteI agree with Kelsey that this could be a positive for the U.S. However, what will happen if Europe's economy starts going downhill? and how will that affect us?
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