After almost ten years of the appearance of the Euro as the official currency in the Eurozone we find different opinions about it. Some of the Europeans citizens say it improved their countries conditions, other ones just say the opposite!
Let's try to make a technical analysis. The introduction of the common currency - seen after such a long time - helped countries that are part of eastern Europe as their weak economies were improved due to the appreciation that the Euro produce in those countries, giving their citizens a huge purchasing power that was not even dreamed before; on the other hand, developed countries don't see big differences and now are suffering the consequences (We only have to read the newspapers! Greece, Portugal, Spain, etc.) Or like Germany that doesn`t want to be the "bank of Europe" that will support a big number of the other countries' situations.
Let me use an example to show what I'm saying:
Suppose a developed country is suffering a deficit on their Balance of Payment due to a deficit on the Current Account, a viable solution could be to depreciate its currency but as a country member of the zone this is not possible as they can´t introduce individual policies.
So, what was "easy" in the old days turns to be a big "headache" in our days.
See you in my next post!
Prof. Lic. Fernando Julio Silva, MSc.
June 2011
Let's try to make a technical analysis. The introduction of the common currency - seen after such a long time - helped countries that are part of eastern Europe as their weak economies were improved due to the appreciation that the Euro produce in those countries, giving their citizens a huge purchasing power that was not even dreamed before; on the other hand, developed countries don't see big differences and now are suffering the consequences (We only have to read the newspapers! Greece, Portugal, Spain, etc.) Or like Germany that doesn`t want to be the "bank of Europe" that will support a big number of the other countries' situations.
Let me use an example to show what I'm saying:
Suppose a developed country is suffering a deficit on their Balance of Payment due to a deficit on the Current Account, a viable solution could be to depreciate its currency but as a country member of the zone this is not possible as they can´t introduce individual policies.
So, what was "easy" in the old days turns to be a big "headache" in our days.
See you in my next post!
Prof. Lic. Fernando Julio Silva, MSc.
June 2011
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