Thursday, 16 August 2012

What some people don't seem to get re the hard Euro

In the years of the hard Euro, ie when the Euro was (until relatively recently) quite high compared to the USD, the Yuan and other currencies of major trade partners (and tourist origins eg USA),  that  suffocated much of EZ business because it not only had a hard time exporting to non-Euro markets but also faced (when eg Euro was 1.4 or 1.5 USD) more fierce competition inside the Eurozone and even their own "national" markets.

So while interest rates for Eurozome member states were lower than past thus allowing them to borrow more (via sovereign bonds) than the pre-Euro years, they were still high enough (in order to stick to the 2% inflation target of the then ECB directorate) compared to US, UK and other central bank interest rates, for the Euro to be expensive Euro vis-a-vis USA, China, etc.

So while the budgets of Euro member states benefited from cheaper money, and maybe companies too, the price competitiveness of many Eurozone businesses (including tourist ones) took a severe, IMO, beating.

No comments:

Post a Comment

Note: only a member of this blog may post a comment.

Share/Bookmark