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.
1. Hollande calls for managed exchange rate - FT.com
2. UPDATE 2-France's Hollande calls for stable euro policy | Reuters