Will The Euro Prove Too Weak To Survive The Global Recession?

One of the most intriguing cases to look at is that of the Euro.  In comparison to many other currencies the Euro is still only a baby.  It started life properly in 1998, so it has only just completed its first ten years on the world stage.  Granted, it has performed well during that time, but now it faces its first difficult period.

As this article from the unlikely but solid source the Malta Independent on Sunday website attests, the Euro is only really now being severely tested.  Currencies like the British pound are having a hard time of it, but they are centuries old.  Even those who don’t have as long a history as the British pound have been around for a lot longer than the Euro.  Therefore we know more or less what to expect when they go through hard times.

Some have speculated that the Euro may even bite the dust for good during the global recession that has only now started to set in.  It depends on many factors of course, and we cannot say for sure whether any or all of them would lead to the demise of the Euro.

One thing is certain though.  The currency does not have the same strength in certain quarters as it had just a year ago.  We can see this simply from looking at our currency converter and checking the figures that it shows us.

Let’s look at the currency pairing of the US dollar against the Euro, for example.  Back on the first day of 2008, the US dollar was getting 0.6793 Euros for each dollar exchanged.  That stayed pretty steady for a couple of months, fluctuating up and down between 0.67 and 0.68.  Up until the 27th February that is, when the exchange rate dropped to 0.6647.  Did this mean the Euro was going to exert some pressure on the dollar?

Well things did drop back for a while, and the 18th March saw an exchange rate of 0.6340.  But fast forward to the 1st January 2009 and suddenly you are looking at an exchange rate of 0.7185.  The Euro may have been touted as a worthy currency but investors are not looking at it as a safe haven for their money during rough times.

We are now seeing the early stages of what could happen during a deepening recession.  We all know that the Euro has been taken on as the currency of choice by a lot of different countries.  These countries all have different economies, different situations and even different beliefs in some cases.  What will happen when some find it harder than others to get by?  Will being part of the Euro become a large problem for some of them?

It is during times like this that things tend to get more dramatic.  It is nice to be a part of something as big as the European Union.  But when things are going from bad to worse there is a real and understandable tendency to try and look after your own rather than stand as part of a larger unit.  Could this be the downfall of the Euro?

We will have to wait and see of course.  But the economy has a long, long way to go yet before it can ride out the recession that is currently deepening by the day.  And the real question is how far the Euro can go along for the ride.  It has not yet been severely tested in any way or form, but we can be assured now that this recession will provide that test.

Everyone has a different opinion on what the outcome will bring of course.  Could we be left with a Europe in tatters, and a single currency that has failed?  It seems hard to believe but who is to say that what we are seeing now is not the first stages of that process?  Could we look back in years to come and point at current times to say that is where the downfall began?

No one knows what will happen.  But it will certainly be interesting to see what does.