Struggling Southern Europe Doesn’t Want to Ditch the Euro

Thursday, 14 Feb 2013 07:50 AM

By Dan Weil

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While the beleaguered economies of southern Europe face a threat to their exports from the euro’s strength, they have no desire to get rid of the currency.

The euro has surged 9 percent against the dollar in the last six months to $1.3449. The euro reached a 14-month peak against the greenback last month.

But that doesn’t make Elio Grasso, a winemaker in Italy, pine away for the lira. “If we were on our own, we’d have bigger problems than Greece,” he tells The Wall Street Journal.

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In Spain and Portugal, at least 70 percent of the populace still wants the euro, according to recent polls. And only 20 percent of Italians believe a euro exit would help their economy, according to an Ispo poll.

“Europeans who now use the euro have no desire to abandon it and return to their former currency,” states a survey by the Pew Research Center.

The euro’s strength helps keep member nations’ interest rates down and gives their economic policies more credibility.

“The answer is not to throw the euro out, it’s to look at what’s not working and fix that,” said Giovanni Ricci, a geologist from Turin, Italy. “If we all returned to national currencies and devalued, you would get a trade war in Europe.”

To be sure, not everyone in Europe is pleased with the currency’s ascent. At a meeting of eurozone finance ministers Monday, France reiterated its support for action to curb the euro’s strength, possibly including introduction of a target level for the currency.

Currency rates need “to reflect the economic fundamentals of our economies of the eurozone,” said Pierre Moscovici, France’s finance minister, according to The New York Times. “Exchange rates should not become subjected to moods or speculation.”

However, experts don’t expect France’s proposal to go very far. “The French have always believed the single currency should be put to the service of exports,” Mujtaba Rahman, an analyst with the Eurasia Group research firm, tells The Times.

“But it’s not a debate they can win, so they are most likely using this to win concessions on other baby projects, from the pace of its own fiscal consolidation, to a fiscal capacity, to a short-term mutualized debt instrument.”

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