Tags: EU | Tough | Questions | Euro | Slide

EU Faces Tough Questions as Euro Continues to Slide

Tuesday, 18 May 2010 08:51 AM

The likelihood of the euro losing more value is rapidly increasing.

As the euro plummeted again, the fate of the currency reportedly is thrust into the hands of European leaders.

If Europe can't manage the debt crisis in the region and avert further slides, the existence of the 11-year-old euro will be questioned.

Leaders could be forced to look at whether to remove the weaker countries from 16-member euro zone in order to halt the turmoil, the Washington Post reported.

“There are still no guarantees the euro can pull through intact from this crisis. No matter how this goes, the euro is likely to suffer looking ahead,” said Jane Foley, research director at Forex.com in London.

The European Central Bank’s plan to buy back the debt of the countries facing economic turmoil is only one part of the strategy to cope with the shortfalls.

The bailout plan also calls for Greece and other countries to vastly slash spending.

Additional cuts in Europe could increase unemployment and drive down the euro even further.

The euro faces an unenviable fate. If European countries don't reduce their spending, the euro’s slide could be even larger and push some nations into default.

“The euro is caught between a rock and a hard place at the moment, and it is hard to see how it can extract itself from this uncomfortable position in the near term at least," said Howard Archer, chief European economist for IHS Global Insight in London.

The EU’s scope in governing other countries in the euro zone’s budgets appears to be very limited, with some concern that potential oversight could be unconstitutional.

“I think the bigger story is that the euro hasn't fallen more than it has given the kind of pressure it has come under," said Jakob von Weizs√§cker, a fellow at Bruegel, a Brussels-based economic think tank.

"This drop could actually help with the adjustment process that Europe needs to go through, and make the region healthier in the long run.”

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The likelihood of the euro losing more value is rapidly increasing. As the euro plummeted again, the fate of the currency reportedly is thrust into the hands of European leaders. If Europe can't manage the debt crisis in the region and avert further slides, the existence...
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2010-51-18
Tuesday, 18 May 2010 08:51 AM
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