Why the Euro Could Fail

I have a love/hate relationship with the euro.

I love it because Sally and I can visit family in France frequently and not have to exchange money. It has also allowed us to live in Paris and Berlin and be free from currency exchange from our income sources in Spain.

I hate it because it makes all my earnings in dollars worth less and anything I may sell online more expensive. When I first moved to Spain permanently I had a work at home job with a friend’s Dot Com startup. It was around 2000. They paid me $45,000 annually. I lived like a king with the exchange to the Spanish peseta. Unfortunately it didn’t last long, the company lost its financing after about a year.

Maybe that was good for me in the end because it forced me to move on and eventually become a small entrepreneur. But back to my point, if we were still on the peseta my little Internet business would be ranking in much more cash and purchasing power, but being part of the -at least at one time- almighty euro has been a hindrance to my standard of living.

I have been happy to watch the euro drop to 1.23 against the dollar and I hope it continues down to parity with the dollar. Another country may have to be bailed out for that to happen.

Now the euro is really being put to the test. Governments and federal banks take certain actions like putting more money in circulation, raising or lowering interest rates (the cost of borrowing money) and other actions when there are major economic problems, like the one we are in, to try to steer the economy back on course. Now each individual country that makes up the euro has no control over these things and is limited to few other measures like raising taxes and lowering expenses. (What they really should be doing anyway.)

So if other countries like Portugal, Spain, Italy and Ireland too become in need of bailouts then this will get really interesting. The government probably doesn’t want to go through the trouble or reinstating the peseta but I for one would be a happy camper! A weaker euro would serve me just as well.