May 31, 2005
SUDDENLY?:
Suddenly, euro isn't looking so good (Mark Landler, 5/31/05, The New York Times)
The euro wobbled in trading on Monday, hitting a seven-month low of $1.246 to the dollar, before closing at $1.247. It has fallen steadily against the dollar in recent weeks, as traders expected a negative vote in France, and steeled themselves for another rejection in the Netherlands on Wednesday.
Few experts are predicting a full-blown crisis for the euro, which is safeguarded by the politically independent European Central Bank. France's refusal to ratify the constitution will have little impact on the day-to-day running of the monetary union, or on the maze of regulations that govern the world's largest trading bloc.
Still, as Paul De Grauwe, a Belgian expert on the currency, put it: "Something psychological has changed."
Like many economists, he believes that the long-term viability of the euro hinges on the gradual political integration of the countries that use it - a prospect that, for now at least, is dashed. "Can the euro survive without a political union?" De Grauwe said. "I have my doubts."
Which begs the question: how would the Union help it survive? Posted by Orrin Judd at May 31, 2005 12:00 AM
The same group of economists, political analysts, etc that were saying the Euro was going to bury the US in the next few years are now saying there might be very minor problems with the EU and the euro. I'm not predicting the EU will completely fall apart but I think this group is still being too optimistic about the EU and the Euro.
Posted by: AWW at May 31, 2005 7:54 AMNot that hard. You cannot have a fiat currency without a soverign to enforce the fiat. The Euro exists because the countries involved got together and agreed to it. Most of them are now in open violation of that agreement. Without the EU constitution, the violations will only grow more blatant until the treaty is denounced and the Euro falls apart.
Posted by: Robert Schwartz at May 31, 2005 8:21 AMIn fairness, I believe that our dollar has also been reaching several month highs against the yen and other currencies.
Posted by: John Thacker at May 31, 2005 10:56 AM