What to Expect from the Euro this Year – Introduction
The past few years have been challenging for the Euro. The currency, which was adopted in 1999 after years of negotiations has seen its value against the mighty dollar rise and fall in recent years.
The currency has risen to become the second most used currency in the world. Its pair with the dollar has become the most traded one in the world.
For years, many analysts, economists, and investors have aired their doubts about the currency. One of the most critics of the currency is Nobel-winning economist, Joseph Stiglitz who published a book called, The Euro: How a common currency Threatens the Future of Europe.
The book was a major critic of the currency and the idealism behind it. See, the euro was created with the aim of opening the Euro area to become like the United States. While the countries would remain independent, most things would pass through Brussels. For example, with the Euro in place, countries seeking trade deals with Germany needs to go through Brussels.
The problem with the Euro is the nature of inequality among the member states. For example, Germany is the region’s most developed country. Its unemployment rate is currently at 3.9%. In the same region, Greece’ unemployment rate is more than 21%.
In addition, there is a lot of distrust among the European countries. For example, a silent rift happens between Germany and France, the two most powerful countries. Germany sees all proposals made by France by first calculating the impact to its taxpayers. On its part, France sees Germany’s proposals as a way for the country to hide in the rules and regulations to retain its power.
In 2015, the Euro weakened against the major currencies as a result of the continuing issues of Greece. At the time, the economy of Greece had collapsed and debt holders were struggling on how to recover their funds. This led to the idea of the Grexit whereby, Greece would exit from the Euro. Germany and France were opposed to this idea because it would have weakened the euro.
In 2016, the news was dominated by the Brexit campaign. This campaign was intended on the UK exiting the Euro trade region. Britons wanted to take their economy back. In June 2016, the Brexit campaign won leading to a major decline in the Euro. It implied that other countries would seek to exit.
In 2017, the year started very well for the Euro. The main challenge was the two important elections in the region. In France, Emmanuel Macron was facing Marin Le Pen, a divisive figure opposed to the Euro. In Germany, Merkel was facing a resurgent SPD candidate. At the end, Macron won in France and Merkel won in Germany. However, Merkel’s win was narrow and had to form a coalition government.
Later in the year, the euro fell as the dollar strengthened.
This year has started on a positive note for the Euro. There is optimism that Germany will form a good coalition government. There is also optimism that the ECB will start normalizing interest rates and end QE. In addition, there is no major election in the region which could make a bigger case for the euro.