The article on the Economist, “If the European economy is so shaky, why is the euro so strong?” by R.A is explaining why and how the value of euro is still remaining strong, even though the economy of Europe is going through many struggles. Throughout the article, it is discussed how appreciation of a currency may not always be good improvement and what negative consequences the appreciation of a currency can lead to. The article also states how the moves of the exchange rates cannot easily be explained and goes into further details about the euro exchange rates.
The article starts by stating that recently the euro zone has been facing a good trend of improvement in terms of economy and managed to pull out of the recession. In the euro zone, the unemployment is decreasing and worries regarding the crises are disappearing by the time. However, there is the fear of deflation. As the article continues, it explains how appreciation of a currency can cause problems that are very significant and serious.
In order to better explain this point, an example of the US cars is given in the article; if US dollar appreciates compared to euro or yen while the price of the cars do not vary, it will be more expensive for the countries that uses euro or yen as their currencies to purchase US cars. As a result of this appreciation in the value of dollars, the number of cars exported will decrease in the United States. This is exactly the same reason why Europe has a fear for a strong currency; the strong euro currency makes European goods and services more expensive to other nations and thus, lowers the amount sold abroad. Also, since the households, firms and government is cutting back, the development and growth of the economy is highly dep...
... middle of paper ...
...s products and services in demand throughout the globe, hence the euro's strength, at least as determined by the "demand" side of the equation. The "supply" side of the equation would involve to what degree the European Central Bank is pushing credit expansion, which tends to push the value of the euro downwards.
In addition to this, the article uses some expressions that does not sound very right when thinking about a big economy as Europe; for example, it is mentioned in the end of the article that, “The surest way to bring it down is to make more euros”. European system certainly has a slow, hardly predictable response time, many variables, and its behavior is definitely nonlinear. Thus, using such a simple and straight forward expression regarding the exchange rate of euros may not be very right thing to do, even though it is a correct statement to some extent.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- The Euro, a common monetary currency that was adopted by the European Union (EU) in 1999, was set up as a means of not only unifying Western Europe under a common method of transaction, but as a way of solidifying the role of the EU throughout the western portion of Europe. By creating this common unit of currency, the EU was able to ensure an efficient way to not only travel across borders, but as an efficient way to partake in international trade. By having one common currency among many countries, it made it possible to not only easily trade money across nations, but also as a way to avoid potentially costly foreign exchange rates.... [tags: European Union, Euro, Eurozone]
1563 words (4.5 pages)
- Abstract On January 1, 1999, when eleven nations of the European Union joined together and all shared the same currency this established the world's first common currency, it is known as the Euro. Is this Euro going to be the down fall of the American dollar as a world dominant currency. What are the effects on the United States economy from this overpowering currency. What impact will this have on travelers from the United States to Europe. The Euro, Effects on America On January 1, 1999 the world watched as 11 nations of the European Union joined their currencies to each other and established the world's first common currency, the Euro.... [tags: Currency Euro European Union]
1165 words (3.3 pages)
- Overview Just a few months ago, news broke that Britain had decided to leave the European Union. Britain’s decision is now known as “Brexit”. There were many theories as to what was going to happen to the economy from Britain leaving the European Union. Now that a few months have passed, we can review the overall outcome of the situation. We can also make guesses as to what will happen in the future. Britain leaving the European Union has had many effects on the European economy as well as the global economy.... [tags: United States, International trade, Euro]
856 words (2.4 pages)
- After World War II, Europe needed a way to reconnect itself as a cohesive continent and find a character in itself. The creation of the European Union was a system to reunite Europe and help with its world identification. However, the EU has suffered setbacks to its formation – mostly economically. In 2009, the monetary policy failed due to the United States’ banking crisis in 2008. Also denoted to as the Eurozone crisis, the main question now is who and or what is to blame. The Maastricht Treaty, signed in 1992 by European leaders, set the ball rolling within the Eurozone crisis by establishing a common currency and creating a flawed setup.... [tags: European Union, United Kingdom, Eurozone, Euro]
718 words (2.1 pages)
- "Europe must prevent Greece from becoming an out-and-out catastrophe and make sure that the same fiscal 'remedy' is not applied to other weak economies" -- Franziska Brantner The brutality of the World War II and the anguish of the Cold War enforced nations in Europe to establish the European Union for peace and unity in the region. With ratification of the Maastricht Treaty by members of the European Community in 1993, an economic and political union; the European Union is formed. In December 2012, the European Union awarded the Nobel Peace Prize for its “historical accomplishments”.... [tags: European Union, Greek Crisis]
1497 words (4.3 pages)
- The creation of the European Monetary Union addressed the desire of establishing a unified European. European unification would theoretically come through the monetary union with the elimination trade barriers among European nations in order to promote more trade around Europe. Subsequently, after the agreement of the elimination of trade barriers would start the progress into enacting the single currency. The policy received scrutiny because the initial promise required by the member could potentially hurt their economy if they were a strong economy relative to the other European states.... [tags: European Union, Europe, Eurozone, Euro]
1291 words (3.7 pages)
- The change in mindset occurred with the signing of the Single European Act in 1985. Whose main objective was to add new momentum to the process of the European construction so as to complete the internal market “(Bache, Bulmer, George, Parker 2014, 2). The SEA was centered around implementing more European integration in order to diminish the idea of intergovernmental bureaucracy in exchange for supranational bureaucracy. The European Council was instrumental in this process because it addressed the skepticism of the single currency by creating an intergovernmental conference to analyze the steps needed for a single market.... [tags: European Union, Treaty of Lisbon]
1516 words (4.3 pages)
- The Euro In Europe, the debut of the euro is widely hailed as the most important event affecting the international monetary landscape since the breakup of the Bretton Woods System in 1971 to 1973, or since the Bretton Woods Agreement in 1944, or maybe even since the founding of the Federal Reserve System in 1913. It has become a contest for European officials and commentators to see who can push the analogy back furthest in time. Eminences elsewhere in the world have similarly greeted the euro with high hopes and great expectations.... [tags: Essays Papers]
3404 words (9.7 pages)
- Europeans and the EURO - A New Era Monetary Union represents a major step forward in the building of Europe and one of the most ambitious collective projects at the tail-end of this century. All European citizens should be fully aware of the extent of the change taking place, a change which goes far beyond the framework of the financial markets alone. Today’s presentation, which is aimed not at the experts but at the future users of the Euro, that is, all of us, offers an excellent opportunity for highlighting the impact of Euro.... [tags: essays papers]
1600 words (4.6 pages)
- Introduction Problems Facing the European Union Sovereignty or Unity. Expansion The European Union. E.U. members listed in order of membership: Official languages of the E.U. The E.U. Government Structure History, How and Why. The Views Against the E.U. In Conclusion Introduction Europe made up more than 30 countries and even more distinct cultures; it is now trying to adjust to new economic systems throughout the world. Today with the trend toward big trading blocks like: N.A.F.T.A.... [tags: European Union Esays]
1723 words (4.9 pages)