The Ever Shrinking
Euro
By Dan Cieslak
Hi, my
name is Dan and I will be your guide through the mystery that is the European
economies. Let’s get started shall we!
First to debrief you on some vocab terms that you might not be aware of that
come up often in this blog.
-GDP: This refers to a nation’s Gross Domestic Product, and
is used to gauge a Countries economic health.
-Output: This refers to a country’s goods or services that
it produces for consumers.
If there are other words that you see and cannot identify, I
highly suggest that you Google define them so that you may fully understand the
content in which I speak of.
Now to the business of this blog, the major economic
problems of the Euro using nations! The countries that use the Euro as currency
are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Malta, the Netherlands,
Portugal, Slovakia, Slovenia, and Spain. So as you may guess, when one of these countries takes a
major economic hit, it is felt by all, and that is exactly what is going on
right now. According to an article called Euro Watch, “Economic output shrank
by .6 percent in euro countries, from October 2012 to December 2012”. This is a
startling number because that means that eleven countries right now are currently
shrink in GDP. The biggest drop in output occurred in Italy where they dropped
.9 percent, in less than half a year!
I have displayed this graph in hopes that you will better
understand the full effect of what the economic drop is in the Euro countries. The graph below shows similar stats of the
Euro countries throughout the year compared to other countries like the US and
UK.
So What Does This Mean?
The Impact of a decreasing GDP is tremendous because it
means that the people in your country are struggling with their jobs. The Euro
is decreasing in value every month and this is happening because of the
decreasing GDP. When your countries
currency decreases, you will have less spending power in international trade
with differing currencies, like America for example. An easy way to put this is
an example like, in 2008 Germany could buy a Ford F150 for 40,000 Euros but now
they must pay even more of their currency for the same good. It would not be surprising to see the Euro
countries start to drop in purchasing power status worldwide in the coming
years.
Another thing that might happen to some of these countries
is what is going on in Greece. The same
article from above stated, “It might get to the point where they (Greece) have
to leave the European Union”. The debt crisis of the Union countries has hit
Greece the hardest where their unemployment rate is now at 27 percent and 2/3
of its young people are jobless. The effects of the declining value of the Euro
will be a major subject to watch for in the coming years.
What Caused This?
The main blame for this decline in both GDP and value of the
Euro is from the major debt that majority of the Euro Union countries are in.
Take Germany for example, they are still in debt from the World War two and a
study done in June 26, 2012 their debt was 83.4% of their GDP. While debt isn’t
the only reason that their GDP is decreasing it is a big part.
Final Thoughts
So to wrap things up, we know that the Euro GDP has been
decreasing since 2009. We know that countries like France are fighting a huge
unemployment rate. Now we know the main reason why the Euro is declining to
because of the HUGE chunk of debt that each country is in. Now that you know
this I hope you can compare America’s economic status to the rest of the world
and see that we are not that bad off.
If you would like some specific questions answered or like
to comment on this blog, I highly recommend you do so at the earliest convince!
Also you can use the URL below, if you would like to read the article from
which I got the statistics from. Thank you all for reading this and considering
my thoughts in your day!
This article is really interesting, and quite relevant to my circumstances right now. I am going to France for spring break and we have been watching the currency rates to see when it would be cheapest to exchange our money for euros. I guess we can just buy them now because the prices to exchange keep increasing, which seems to be because of the drop in GDP as well as the country’s debts. Hopefully when I go the economy will improve a little bit otherwise the prices for souvenirs will probably be inflated.
ReplyDelete- Kayla Vitalbo
As I was reading your blog post I could not help but wonder what the cause of this “ever shrinking euro.” As I got to your section What Caused This? I was still confused. You said that the euro has been decreasing in value since 2009, but the main cause you stated was World War II which happened well before then. I’m not doubting that Germany is still in debt from the war, but I can’t help but think there is another more recent cause.
ReplyDeleteDan, great insight and thoughts. One thing that I thought about while reading your post is the potential effects this has on the US GDP. As we know GDP is comprised Consumer and Government Spending, Investment, and net-exports. Since the people using the Euro are suffering lower GDPs, they will spend less and as such, buy fewer imports -- i.e. US products. With Europe needing less, US net-exports has the potential to fall and as such, we could see our GDP decrease.
ReplyDeleteDan, I have always been curious to the value and overall history of the Euro. Your analysis on the article, “The Ever Shrinking Euro” helped gain a new insight on the background of the Euro. I had heard in the news that Greece had recently feel into a bad debt, and possibly even depression. Your analysis also assisted me in learning more about the debt in Greece, and the affects it will have on other countries that utilize the Euro.
ReplyDeleteDan, I love your input on this topic! They have been struggling and fighting unemployment like the U.S. has, so it's not like they are the only ones! I like the fact that you brought up the topic on the US GDP and Europe's GDP. If Europe could only find a source or system where Europe's imports and exports are even so their GDP will maintain a balance.
ReplyDeleteBecause the Euro is used in so many countries, the decrease in value of the euro, could also have repercussion throughout the world due to the large amounts of international trade that is engaged in every day, and with the Euro being as weak as you make it sound, Dan, we could have some serious problems, especially when compounded with the impending sequestration in the US.
ReplyDelete