Saturday, June 29, 2013

Running Towards The Crash

The euro has undergone quite the fall from grace lately. Originally hailed as a symbol of European unity, the shared currency now is viewed by some as the thing that will cause- or has already caused- the economic collapse of the entire continent. The problem, really, is that multinational currencies are only as strong as their weakest nation. If all the nations are stable, there's no problem. But one weak nation can affect the rest.

The euro began involving Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Monaco, the Netherlands, Portugal, San Marino, Spain and the Vatican. When they switched over in 1999, most were fine. Italy (with San Marino and the Vatican sharing their currency) was very shaky, but they, like any weaker nation that pegs itself to a currency also used by someone else, viewed it as a stabilizer. A fresh start. Portugal and Spain were also comparatively weaker economies. The euro could handle them, though, for now. Then the eastern half of the continent, seeing how well the euro was doing originally, decided they wanted in on it too. Why not? It'd be a way to boost their economies as well.

Greece was the first nation to join after the originals. They were since joined by, in order, Slovenia, Cyprus and Malta, Slovakia and Estonia. With the exception of Slovenia, those later nations looked at least like passable additions. Greece, however, was as shaky as Spain, Italy and Portugal. After the global financial crisis hit, they were all re-exposed as the weak links.

Despite this, the euro is not only something nations are not abandoning or kicking anyone out of, but Latvia is now set to join the eurozone come January (at the same time Croatia joins the EU). As of this post, one Latvian lat is worth 1.42 euros. That's a good indicator. You typically want to be the lower number. That said, many Latvians aren't thrilled about this, having voted in majorities for anti-euro candidates last month.

We'll just have to see who's right.

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