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Europe’s single currency, the euro, is 21 years old, but whether one is celebrating or not rather depends on which of its member-countries one lives in.
For Germany, the euro has been a boon, helping the country’s mighty export machine to pile up huge trade surpluses.
The same is true to a lesser extent for the Netherlands and Finland.
Holding steady over 12 months
But for the “southern” countries, it has been a very different story. Italy has barely grown at all since the currency was launched in 1999, and the boom and bust woes of Greece need no repeating.
Many warned in the run-up to the launch of the euro that it was folly to try to force a one-size-fits-all currency on a disparate group of countries, now 19 in number. With the passage of time it is getting harder to claim they were wrong.
Germany 30 – DE30
Against the dollar and the yen, the story of the last 12 months has been one of relative stability. On 27 May 2019, a euro bought $1.1193, and three months ago it was worth $1.0880 on 26 February.
A month ago, on 27 April, a euro bought $1.0827, but has since recovered lost ground. This morning, it was up 0.37% on the previous close at $1.0937.
Its yen value a year ago on 27 May 2019 was 122.585 yen, and three months ago, on 26 February, it was worth 120.128 yen. One month in the past, on 27 April, the euro traded at 116.136 yen and this morning it was 0.47% higher at6 117.924 yen.
The euro-sterling rate tends to be of particular interest as the UK’s declining to sign up for the single currency may be seen as the first step towards Brexit. The euro stood at £0.8826 a year ago, on 27 May, and was buying £0.8434 three months ago, on 26 February. One month ago, on 27 April, it was worth £0.8711, and this morning it was 0.28% lower at £0.8914.
Germany under fire on trade surpluses
For the euro-zone, the immediate economic outlook does not look particularly encouraging. In its latest forecast, the International Monetary Fund (IMF) is forecasting all advanced economies to shrink this year by an average of 6.1% under the impact of the coronavirus. But while the figure for the US is 5.9%, that for the euro area is 7.5%.
Japan is forecast to shrink by 5.2% and the UK by 6.5%.
Within the euro-zone, Germany is forecast to see output decline by 7% and France by 7.2%. But again the “southern” countries are harder hit, with Italy expected to see its economy decline by 9.1% and Spain by 8%.
Germany’s success in getting the euro to work for its exporters has drawn much criticism, not least from the US authorities. Critics say the German mark was subsumed into the euro at an under-valued rate, building in a competitive advantage for its exporters. This has been strengthened by so-called internal devaluation, in which wage restraint mimics the effect of a decline in the value of the currency, making exports cheaper in foreign markets.
