Euro Struggle Set To Continue

Euro Struggle Set To Continue

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Euro Struggle Set To Continue

 

By Adam Jordan

 

In less than a month the pound has fallen by eight US cents, more than 4 per cent, and it was not even sterling’s fault. Investors have been so agitated about the euro’s problems that they have shifted serious money away from the euro into the “safe-haven” US dollar. Sterling has strengthened against the euro as well, to the tune of about seven cents – more than 6 per cent – from its late October lows.

The problem with the euro stemmed from investors’ concern about lending to the governments of Greece, Ireland, Portugal, Spain and other states that might not give the
money back. Greece, and now Ireland, have received a guarantee of some €200 billion of EU taxpayers’ money (mainly German taxpayers). The others have not. So why, investors ask themselves, should they lend to Portugal or Spain if they are not guaranteed?

It is a big problem for the euro and one that that has prompted serious discussion about its very survival. The EU’s case-by-case approach, rescuing Greece then Ireland and waiting to see who next joins the queue, is failing to convince investors. Until they become convinced that the EU is prepared to see it through the euro will struggle.

Adam Jordan is a currency specialist at foreign exchange provider Moneycorp

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