Tuesday, June 28, 2011

A Greek silver lining

It seems possible that the US dollar might have reversed its long slide in value against the Euro. Greece, a Eurozone member, is in the news because of public unrest against austerity measures, after seriously blotting its copybook previously by falsifying data sent to the European Central Bank (ECB) and other authorities. This has adversely affected the Euro because of worries that a constituent country might be setting itself up for default on its sovereign debt.

But, of course, a lower rate of exchange for the European currency is a good thing. It makes European exports to the world’s largest consumer economy, the USA, easier. It makes imports, not just from the US but from many other countries, such as China, whose currency is pegged to the dollar, less attractive.

A decline in the Euro against Sterling will discourage shopping trips to Newry and will mean that Irish consumers will spend more at home.

Notwithstanding the perfidy of the Greek Department of Finance, there is little real fear that Greece will, or will be allowed to, default on its commitments to the extent that the whole European monetary system is irrevocably damaged. In the meantime it is possible that Hellenic fiscal management misdemeanours might have provided something of a silver lining for the other members of the Euro club.

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