Posts Tagged ‘euro’

The European Union is…

Friday, June 3rd, 2011

The European Union is a political and economic organization made up of 27 countries in Europe. It’s not a country by itself, but in some ways it acts as a high-level governing organization for its member nations. Being part of the Union means that citizens, goods, and services are allowed to move freely between affiliated nations, without having to deal with things like visas or trade restrictions. Members of the EU also use the same currency, called the Euro.

Basically, being part of the European Union is like being in a club whose members are from all over Europe and who have decided that many of the same rules will govern every member – despite their differences in nationality. But not every European nation is a member of the EU (Switzerland, for example), and some member nations have not yet adopted the official currency (the United Kingdom still uses the Great British Pound).

The Real Value Of A Falling Dollar

Wednesday, October 13th, 2010

The value of U.S. currency has gone down nearly 10% against the euro in the past three months, but the impact on exports, tourism, the price of oil, and foreign investment may not necessarily be as bad as it seems…

  • When the value of the dollar falls, it means that $1 is worth less compared to one unit of another form of currency. So if $1 was once worth 1 euro, a fallen dollar might be worth only half a euro. That makes U.S. dollars cheap to euro-holders, and euros expensive to dollar-holders.
  • A cheaper dollar means that U.S. goods are more attractive to foreign buyers, so exports will likely rise. Since many American companies make a good portion of their profit outside the country, this could be a significant boost to the economy. A weak dollar is also an enticement for foreign tourist to visit the U.S. and spend lots of euros and yen!
  • The price of imported goods is going to increase. Of course, this could just encourage Americans to drive domestic industry by purchasing more affordable American-made goods. But not every product can be duplicated domestically.

Facts & Figures

  • In 2009, foreign tourists in the U.S. were responsible for $120 billion in revenue.
  • In July, an 8GB iPhone selling for $99 would have cost an Italian customer 78 euros. Today it would cost only 71 euros.
  • If they cashed out now, investors in the Euro Stoxx 50 index would be up 17% from 3 months ago simply because of the change in the dollar’s value.

Best Quote

“International finance isn’t pretty. If everyone focuses on exports, it’s a race to the bottom in exchange rates.” – Aroop Chatterjee, Currency Strategist at Barclay’s Capital

Things Are Looking Up For Greece

Thursday, August 19th, 2010

Greece, after plummeting into an economic black hole a few months ago, is slowly crawling back to more stable territory.

  • Greece is in the process of implementing their austerity program, which includes civil service pay, reduced pensions and increased taxes.
  • The initial success of this program allows Greece to receive the next installment of its bailout package – a $9 billion boost.
  • Though the progress of Greece’s economy is overwhelmingly positive, there are still large economic glitches to overcome.
  • In the first half of the year, tax collection was below target and local government spending was over budget.

Facts & Figures

  • The Euro, which dropped to $1.19 in June has rebounded to $1.32.
  • Greece is trying to dig itself out of a $400 billion budget deficit.

Best Quote

“You have a government here that is clearly determined to move ahead. This program is off to a very good start. I would say a very impressive start.” – Paul Thomsen, Head, I.M.F. Delegation.

Strikes In Greece And Spain Indicate A Shaky Economy

Friday, July 2nd, 2010

Stress in southern Europe reaches a high as citizens protest continued economic blows.

  • Strikes raged in Greece and Spain as governments desperately tried to revitalize the tumbling Euro by cutting pension plans and public sector pay.
  • The European Central Bank, in a one year cash injection strategy to get Spanish banks back on their feet, has reported that their bailout strategy will not roll over into the following year, leaving shaky Spanish banks furious.
  • Investors fear that the rising stress caused by widespread strikes, coupled with the weak condition of the Euro, could hurt European economic recovery.

Facts & Figures

  • The Euro has been pushed to a lifetime low against the Swiss franc.
  • European shares fell to their lowest in nearly three weeks, dropping -1.7%.

Best Quote

“Sentiment appears fragile and significant downside risks remain to already pretty muted euro zone economic recovery.” – Howard Archer, Chief EuropeanEconomist, IHS Global Insight

Will The EU Save One Of Its Own?

Wednesday, February 10th, 2010

The European Union hasn’t been faced with the possibility of default by one of its member countries before. The world is watching as the relatively new eurozone figures out how to deal with the bad times as well as the good.

  • Greece (a member of the European Union) may not be able to meet all of its debt obligations, so the European Central Bank is meeting to consider what to do to protect the stability and credibility of the euro.
  • While there is no official bailout plan in place, certain countries within the eurozone (the group of EU countries that have adopted the euro as their currency) are piecing together aid plans that would transfer some of Greece’s debt burden to taxpayers in their own nations.
  • The EU’s rules require eurozone countries to keep their debt below a certain level, which Greece has repeatedly failed to meet. But the rules also state that the European Central Bank and central national banks cannot bail out countries, so Greek recovery may be left up to the will of individual eurozone countries.

Facts & Figures

  • The EU’s limit on debt ratios for eurozone nations is 3% of GDP.
  • Greece is expected to show a 13% budget deficit this year.
  • Greece owes a total of $303 billion to foreign banks.

Best Quote

“As long as it is very clear that any support only comes with very, very stringent conditions attached, it would not affect the moral-hazard question. It is a choice between two evils.” – Fabian Zuleeg, Chief Economist at the European Policy Centre

Belgium but not Britain? Doesn’t Euro mean Europe?

Tuesday, October 27th, 2009

If you traveled through Europe before 2002, you probably had a lot of fun juggling the different currencies and their crazy exchange rates. You could spend 20 francs on a coffee in Paris and then in Italy it would cost 5000 lira – a bit confusing. But today, you’ll pay for that coffee in Italy and in France with the same bill: the euro.

Even though it’s called the euro after (you guessed it) Europe, its name is a little misleading. There are 45 countries in Europe but only 27 of them have joined the European Union. Out of those 27, only 16 use the euro as their official currency. That’s means only about 1/3 of Europe actually uses the euro! Why so few though?

There are several reasons why:

  1. You have to be a member of the European Union to adopt the euro as your currency. There are 18 countries who don’t belong, including Switzerland (which geographically is the center of Europe).
  2. You must follow strict financial guidelines to be allowed to have the euro; some countries (like Poland) have yet to meet them.
  3. Lastly, you have to want it. Some countries like Britain, Denmark, and Sweden don’t want the euro as their official currency. (If Mexico wanted us to jointly adopt the same currency, we probably would say no as well because of the effect Mexico’s weaker economy would have on our own.)

As Europe continues to loosen the national borders that divide it, the Euro will continue to be adopted by more and more countries. Probably soon, you won’t remember what it was like to carry 20 different currencies in your pocket while visiting only one continent.

The Euro is…

Monday, August 17th, 2009

The Euro is the monetary unit of the Eurozone, including Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain. Basically, it is the currency used by the majority of the European countries and if you were travel to Europe, you would exchange your U.S. Dollars for Euros in order to make purchases.

Where do they use the Euro?

Sunday, July 5th, 2009

While the answer may seem obvious – they use the euro in Europe – it’s actually not. They do use it in Europe, but not in all of Europe, and not even in the whole of the European Union. As of 2009, 16 of the 27 EU member countries have adopted the euro as their national currency. It began in 1999 with Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, and Finland switching their currencies over. Greece followed suit in 2001, Slovenia in 2007, Cyprus and Malta in 2008, and Slovakia in 2009. Combined, these areas are called the “eurozone.” A country must meet strict criteria in order to qualify for the euro standard. That’s why countries gradually join the eurozone instead of all at once.

329 million people living in these 16 countries use the euro daily. Additionally, some neighbor countries and former colonies use the euro as an unofficial currency as well. For these reasons, the euro has become the second most important international currency just behind the dollar.

What’s The Worst-Case Scenario For The Financial Crisis?

Saturday, April 25th, 2009

It could just start with “Sale” signs at your favorite stores. Unfortunately, Spain is getting a glimpse…

  • Several European nations – most notably Spain – are facing deflation in the wake of the global financial crisis.
  • As consumer demand continues to drop, Spanish merchants are cutting prices, salaries, and employees just to keep afloat.
  • Because Spain’s currency (the Euro) is now governed by the European Union, there is very little the Spanish government can do to control potential deflation (such as slash interest rates or devalue the national currency).

Facts & Figures

  • Spain’s unemployment rate is currently 15.5% and could reach 20% in the near future. Among workers under 25, the rate rises to 31.8%.  In comparison, the unemployment rate in the US is under 9%.
  • La Casa de la Caridad (Valencia’s main soup kitchen) expects to serve 12,000 meals to needy residents in April – three times as many as last year.
  • Since last year, wholesale prices in Japan dropped 2.2% and 8% in Germany; in the U.S., the Consumer Price Index dropped for the first time since 1955.

Best Quote

“Alarm bells are going off.  Economies can recover from deceleration, but it’s harder to recover from a deflationary situation. This could be a catastrophe for the Spanish economy.” – Lorenzo Amor, President of the Association of Autonomous Workers

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