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EUROPEANS WILL BE getting less buck for their euro as the single currency has hit an almost nine-year low against the US dollar.
Fears of a Greek exit from the eurozone have been heightened as the far-left Syriza party takes a poll lead less than three weeks out from a Greek national election.
These concerns coupled with suggestions from ECB President Mario Draghi that inflation needs to be increased have led to the value of the single currency tumbling against the dollar.
After early market trading today, €1 will get you slightly below $1.19, the lowest level since March 2006.
The exchange rate has recovered slightly to $1.1950, a figure which represents a decline even on trading from Friday evening.
The chart below demonstrates how the Euro has been declining steadily against the dollar over the course of the past year, with the current level down on the 12 month euro high of €1 to $1.39 in May 2014.
A rocky Euro is nothing new and has routinely been a symptom of both New Year market volatility and political instability in periphery nations, often Greece. This latest slump is no different with Greek elections on the immediate horizon.
The head of the radical Syriza party said Saturday that if he won he would start “necessary change” in Europe and end painful austerity policies.
Over the weekend, the Der Spiegel weekly quoted German government sources as saying that Berlin sees a Greek exit from the eurozone as “almost inevitable” should Syriza party win the snap poll.
Both Merkel and her finance minister Wolfgang Schaeuble had come to consider that Greece’s departure from the single-currency bloc would be “manageable”, the magazine said.
French President Francois Hollande today urged Greece to abide by its European commitments.
“The Greeks are free to choose their own destiny. But, having said that, there are certain engagements that have been made and all those must be of course respected,” Hollande told French radio.
Super Mario
The euro’s losses meanwhile added to a sell-off on Friday that came in response to an interview with Draghi in German business daily Handelsblatt.
Draghi had said that deflation was a threat to the eurozone and the ECB needs to be prepared to counter it. He added that the risk that the central bank will not be able to push inflation up “has increased compared to six months ago”.
Additional reporting by © – AFP 2015
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Should be a bumper year for tourists from the UK and the States so
Not so good if you plan on going to the US from Ireland tho.
The Greeks lied about their balance sheet prior to being admitted to the Euro, they lied about their tax receipts, they lied about repaying debts, why haven’t they been f**ked out long before now never mind worrying whether they might leave????
If they leave the Eurozone their debts will have to be written off increasing the burden on the remaining members.
If they stay in the money won’t be paid back but they debt will remain on the books and not shared out amongst the other members.
EU let Greece is as they saw safety in numbers but now must admit that it was a huge mistake.
Which European state benefits from a weak Euro the most?
Germany.
And who made the first soundings about a Greek exit?
Germany.
Seeing a pattern here?
Ming was spot on, we are in an abusive relationship with Europe, and like any abusive relationship the sooner you get out of it the better.
EURO project looks to be in big trouble.
A weak euro is good for exports, and investment. As an export led economy, this is no bad thing!
Agreed, another boost for Ireland’s excellent FDI strategy. A dramatically lower oil price is a boost to many companies too. Some have said the dollar will even reach parity and more with the Euro over the next 3 years as the US roars ahead.
Basing your economic model so heavily on exports simply means you are allowing external factors to steer your economy. Allowing the domestic economy to stay stagnant has been one of the single greatest errors of this government.
Reasonable point but it is not a zero sum game. Having a such a great FDI strategy does not automatically mean that the domestic economy is neglected. FDI has served Ireland well since the 80′s in such a globally competitive world. That is the world we now live in.
I would tend to agree more though generally re the stagnant domestic economy by the current administration. Difficult to do for a small country after they continued taking on the enormous burden of the banking debt.
Looks like it will be easily to sell Mercedes in America from now on, well that’s what the euro is for
Greece may leave, but Lithuania, although a member of E.U. since 2004, adopted the Euro, a few days ago.
Any alternative is generally met with fear in this system.
We all recognise this system benefits the few yet when someone comes out with an alternative the powers that be scare you away, I look forward to Greece trying something different. In reality it’s the EU’s fault they never inserted a viable opt out clause for the euro.
The Euro is going down the drain
We need to leave the EU asap
The Greeks are to blame for their own mess, they lied to everybody about their finances, the rich fiddled like violinists in an orchestra, the retirement age for some was to low, some benefits were far to generous. It was unsustainable!
it also means higher rates of interest in the next couple of years. If capital is flowing from Europe to the US it means the bond market will demand a higher return to buy European Debt.
Shouldn’t the headline read “… fewer and fewer US dollars…”?
Out houshold income is pegged to the dollar.. This decline boosts our income in euro terms by about €37k after tax.
The Bureau de Change in Boston Logan Airport so generously offered me 97 dollars for 100 euro yesterday
Quit your yapping and learn how to trade it folks.
What would deflation in the euro/Germany area do for our “robust” recovery? I couldn’t help but use the word robust but anybody have a clue? Cheaper imports I would imagine would be good and we seem more depended on uk and USA for growth
There’s a similar abusive relationship between the Irish government and the ordinary people of Ireland.
have your say