Re: Weak euro

["ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

If Euroland is prosperous as a whole, then the weak constituent economy
with high unemloyment would leak workers to other stronger constituent
economies. Conversely, if wages drop due to high unemployment, euro
investment will flow in from other parts of Euroland.

But if Euroland as a whole heads toward a rescession, then euro
devaluation is the only option.  But the ECB claims that devaluation of
the euro is inflationary because Euroland imports more than it exports.
The only hope for the Euro is for the ECB to make the euro a currency of
choice in world trade, on par with the dollar and perhaps even with the
Yen (as the Japanese wish).  But this policy commitment requires
adjustments in social programs competitive with US trends (such as low
cost layoff of workers or reduction in worker benefits).  This approach
EU politics may not permit (thank goodness).  The EU ministers are
divided about ECB intervention for this very reason, reflecting the
difference in domestic politics across Euroland.
The oil crisis is a good example.  Euroland is getting killed by $35
oil, siphoning money to the oil producers.  But EU governments refuse to
lower gasoline taxes which are three time that of the US. The EU
government have gotten used to the revenue.

All economic problems are solvable, but not without a cost.

Henry C.K. Liu

John Gelles wrote:

>             Dear Sven (and any who can answer),
>
>             In a worst case scenario, what does a nation locked
>             into the euro do -- if it must spend money it does not
>             have and cannot borrow,  to end unemployment and
>             depression?
>
>             John Gelles
>             Votes "no" on any namero, amero, or nasamero