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Economy in Brief

Euro Area Budget Crises And The Euro
by Louise Curley February 10, 2010

The budget crises in Greece, Spain and Portugal have left their mark on the Euro.  The first chart shows the dramatic rise over the past year or so in the budget deficits of the three countries on a twelve months moving average basis. By yesterday, the euro had declined against the dollar by more than 10% from its peak of $1.512 on December 3 of last year.  the decline in the euro is shown in the second chart. 

The euro gained some ground today as  the talk of possible ways to resolve the budget problems has begun to drown out the talk of doomsday.   Nevertheless, the euro is likely to remain under pressure until an accommodation to the problem can be seen. .Pressure on the euro could prove to be not such a bad thing.  Europeans have been complaining that the strong euro has affected the demand for their exports adversely.  A lower euro could stimulate demand and increase production, which would provide a better background for working out the budget problems.  

The day to day progress of the euro can be found in The Haver Data Base, INTDAILY.  The narrow and broad trade weighted indexes of exchange rates for the Euro Area are also found in this data base.  The narrow trade weighted index for the Euro Area is shown in the third chart.

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