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Euro to hit parity with USD?


shalab
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The Euro zone has a balance of trade surplus and current account surplus, so it does not seem like the Euro is overvalued on that basis. That is the problem when countries like Germany have such success with exports, compared to some of the southern European countries.

Im sure the politicians would like it to go down a lot to reduce unemployment in certain areas, but then surely the Euro area will just export even more, pushing it up again.

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Im sure the politicians would like it to go down a lot to reduce unemployment in certain areas, but then surely the Euro area will just export even more, pushing it up again.

 

Exactly. The problem with the Euro is a structural one: it simply makes Germany too competitive, and leaves Italy, Spain and even France too uncompetitive. If it weakens, Italy, Spain and France can breathe more easily, but Germany’s exports go through the roof. If it gets stronger, Germany’s exports might be kept in check, but Italy, Spain and France slowly slid into depression.

There obviously is no easy solution.

Unless 1) a fiscal union is finally established, 2) Italy, Spain and France become like Germany… And I don’t know which among the two is more unlikely! Surely, neither 1) nor 2) will happen in a relatively short period of time. It is 6 years now the southern part of Europe has been literally suffering… and it probably is going to get a lot worse, before it gets any better.

 

Gio

 

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