The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Inside Investment: Currency disunion

With the euro hitting fresh record highs against the dollar, it must be tempting for European policymakers to crow. However, complacency could lead to crisis.

andrewcapon.gif

A decade ago you could not avoid the euro. Every conference organizer and bank was jumping on the events bandwagon in the run-up to the launch of the single currency on January 1 1999. However, as the single currency approaches its 10th year it is hard not to think that this fanfare was fully deserved. The single currency has not only survived, it has prospered. With the euro climbing to new records against the US dollar on an almost daily basis there are doubtless plenty of smug central bankers in Frankfurt.

However, in spite of its apparent success, the euro looks more vulnerable now than at any time since its creation. The reason is the diverging fortunes of the Europe’s economies. Germany runs the world’s largest current account surplus in absolute terms, at $286 billion, or more than 5% of its GDP. Spain runs the world’s second-biggest current account deficit, $161 billion, or 9% of GDP. Global imbalances have been debated ad nauseam in recent years. European imbalances could soon rise up the agenda.

This diverging economic performance of the eurozone’s biggest and fourth-ranked economies is the clearest symptom of the problem.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree