Tuesday 23 June 2015

WILL THE EURO LAST FOREVER ? IT COULD .....but


The unending negotiations on "Grexit" provoke doubts over whether the EURO itself will last and if so, for how long.   The EURO was officially became a World currency in the year 2002.  

One could ask the same questions with respect to the US Dollar and the British Pound Sterling, two long standing currencies quoted on all World Foreign Exchange markets for more than 100 years.

After the end of the War in 1945, a worker's average wages in Britain were about five pounds PER WEEK. Today a worker is paid about seven pounds PER HOUR .This proves that there has been a rise in the cost of living !   

The pound sterling today obviously buys less than it did 70 years ago, but it has still retained a reputation of being a "stable" currency because its value was always reasonably protected on Exchange markets.  The same can be said for the US Dollar.
 
If ever the EURO is not, or can no longer be, "sufficiently protected" then it will simply depreciate in value against other currencies which do not decline in value. For example, recently the parity of the EURO was allowed to decline by about 10% to make EUROZONE products more competitive on International markets.   

This means the EURO "could" last for a long time, but ultimately may have to be "restructured" to become the "NEW EURO" if in the EUROZONE economic policies cause, or do not prevent, a deterioration of the National Financial Results in all the countries of the ZONE. 

If this happens, the EURO would be shunned on Financial Markets and lose value if it is not effectively protected.  

There are several countries all over the World which have had to restructure (or fundamentally devalue) their currencies at least once, some several times, particularly in South America !

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