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Thread: New Franco-German clash looming over the euro

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    Politics.ie Member Shqiptar's Avatar
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    Default New Franco-German clash looming over the euro

    The word on the street is that the worst of the euro crisis is over and while there's a lot more austeritizing to do, the home straight is supposedly at least in sight.

    All of this is based on the assumption that Spain and Italy won't get destabilized politically over the next few months and that the modest growth seen in eurozone countries such as France will be maintained. Whatever about the former assumption, the latter one is looking more and more threadbare.

    The euro has been rising of late on the markets because of the sense that the eurozone is out of the woods and the beggar-my-currency policy of the Americans and Japanese. A soaring currency is precisely what eurozone countries don't need right now. Government cutbacks mean that the domestic economy will be muted at best. The eurozone needs exports to keep growing and a soaring euro will make that much harder.

    France needs to grow 0.8% this year in order for deficit targets to be met. Addressing the European Parliament today, Francois Hollande called for a managed exchange rate what with the euro having risen 4% in the last month and being now at a 15 month high.

    While the European Central Bank has declined to comment the Germans are crying foul; but if a rising single currency drives the eurozone back into recession, something has got to give. With interest rates at record lows, the ECB doesn't have many tools left in its toolbox.

    Sources:
    1. Hollande calls for managed exchange rate - FT.com
    2. UPDATE 2-France's Hollande calls for stable euro policy | Reuters
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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    *gets a bag of popcorn*

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    Politics.ie Member ruserious's Avatar
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    Quote Originally Posted by YouKnowWhatIMeanLike View Post
    *gets a bag of popcorn*
    If I eat any more popcorn during this crisis, I'll turn into one.
    Boycott the "Irish" Sun rag.

  4. #4
    MrFunkyBoogaloo
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    Quote Originally Posted by Shqiptar View Post
    The word on the street is that the worst of the euro crisis is over and while there's a lot more austeritizing to do, the home straight is supposedly at least in sight.

    All of this is based on the assumption that Spain and Italy won't get destabilized politically over the next few months and that the modest growth seen in eurozone countries such as France will be maintained. Whatever about the former assumption, the latter one is looking more and more threadbare.

    The euro has been rising of late on the markets because of the sense that the eurozone is out of the woods and the beggar-my-currency policy of the Americans and Japanese. A soaring currency is precisely what eurozone countries don't need right now. Government cutbacks mean that the domestic economy will be muted at best. The eurozone needs exports to keep growing and a soaring euro will make that much harder.

    France needs to grow 0.8% this year in order for deficit targets to be met. Addressing the European Parliament today, Francois Hollande called for a managed exchange rate what with the euro having risen 4% in the last month and being now at a 15 month high.

    While the European Central Bank has declined to comment the Germans are crying foul; but if a rising single currency drives the eurozone back into recession, something has got to give. With interest rates at record lows, the ECB doesn't have many tools left in its toolbox.

    Sources:
    1. Hollande calls for managed exchange rate - FT.com
    2. UPDATE 2-France's Hollande calls for stable euro policy | Reuters
    The €uro is appreciating because of the ECB's intervention- not because the markets sense the eurozone is out of the woods.

    And, like YKWIML...


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    Politics.ie Member commonman's Avatar
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    Great is this the end of the fuccken euro.

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    Some economists feel that the next stage of the euro crisis isn't growth returning to the periphery, it's recession spreading to the core.

    The basic problems in Europe have not been solved. Ireland is living, breathing proof of that. And the strength of the euro (up 12% against the dollar in the last six months) is only going to make things worse.

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    Politics.ie Member ruserious's Avatar
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    Quote Originally Posted by Davidoff View Post
    Some economists feel that the next stage of the euro crisis isn't growth returning to the periphery, it's recession spreading to the core.

    The basic problems in Europe have not been solved. Ireland is living, breathing proof of that. And the strength of the euro (up 12% against the dollar in the last six months) is only going to make things worse.
    I need dollars for next year. Should probably buy now...
    Boycott the "Irish" Sun rag.

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    Politics.ie Member Shqiptar's Avatar
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    Quote Originally Posted by MrFunkyBoogaloo View Post
    The €uro is appreciating because of the ECB's intervention- not because the markets sense the eurozone is out of the woods.

    And, like YKWIML...


    The FT in source 1 in the OP begs to differ.

    Investors have returned to the eurozone in force this year on increasing optimism that the worst of the crisis is over.
    Of course, there's the shenanigans from other central banks too. What intervention are you referring to?
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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    Politics.ie Member Shqiptar's Avatar
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    Quote Originally Posted by Davidoff View Post
    Some economists feel that the next stage of the euro crisis isn't growth returning to the periphery, it's recession spreading to the core.

    The basic problems in Europe have not been solved. Ireland is living, breathing proof of that. And the strength of the euro (up 12% against the dollar in the last six months) is only going to make things worse.
    Precisely. Remember when Cassandra Syndrome used to get all excited when the euro would slide down near $1.20? There's a lot more euro-doom waiting out there if it goes back above $1.40.
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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    Politics.ie Member Shqiptar's Avatar
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    Quote Originally Posted by commonman View Post
    Great is this the end of the fuccken euro.
    I'm resigned to the fact that the euro won't "end". It's a political project and politicians will never admit they're wrong. They're just going to keep patching up the patient and praying that their shift will end before that little green screen starts going beeeeeeeeeeeeeeeep.
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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