Euro slumps to four-year low
Shared currency falls on fears that EU austerity measures will stifle economies.
Andre Sapir, a former economic adviser to the president of the European Commission, told Al Jazeera that the “massive bailout” could not stop the euro crisis while it was still only a plan.
“The mechanism that has been set in place. It has yet to be truly put in place as far as the money’s concerned. Member states cannot decide such a mechanism at such short notice,” he said.
‘Quantum leap’
Angela Merkel, the German chancellor, said on Sunday that the rescue package had only bought the euro zone time to tackle its basic problem – a widening gap between its strongest and weakest economies.
She said the solution is greater co-operation in financial and economic policy across Europe to ensure the currency’s long-term stability.
Jean-Claude Trichet, the president of the European Central Bank, told German newspaper Der Spiegel that there was now a need for “a quantum leap in the governance of the euro area”.
The package, which came on top of an earlier $146bn joint EU-IMF bailout of Greece, appears to have calmed fears of immediate disaster, but longer term issues remain.
Investors remain sceptical about the ability of Europe’s governments, especially Greece’s, to push through the austerity measures promised in the face of likely political and social unrest.
They also fear that even if cutbacks are made, they will kill off growth and make it harded to pay government debt.
Monday’s fall saw investors seeking safety in gold.
“It’s the safe-haven thing. Gold doesn’t earn you any interest or dividends, but who cares? … The euro zone is a house of cards,” a Europe-based gold trader told the Reuters news agency.
Despite its decline, the euro still remains above its average of $1.18 since its creation back in 1999, and a number of analysts think that the selling has been overdone.
They think the currency may experience a temporary near-term rebound as traders buy euros to settle recent deals.