Friday, January 13, 2012

The Euro’s Tenth Birthday Not A Happy One

euro banknotes

This year, the “euro” celebrates its tenth anniversary.
The euro is a unit of money (or “currency”) that is used by 17 countries in Europe.
It wasn’t always that way. Before the euro, every country had its own currency. For instance, France had the franc, Italy had the lira, Germany had the Deutschmark and so on.
The euro was created in 2002 when a group of European politicians and financial leaders decided it would be helpful if they had the same type of money.
The idea of the euro was to make it easier for countries to buy and sell more easily between themselves, because they would all be using the same currency. Although many countries in Europe adopted the euro, England and Sweden refused to make the switch because they were afraid it would weaken their own financial situations.
Now the euro is in trouble. Several countries, like Greece, Portugal and Ireland borrowed a lot of money when times were good but soon found they were unable to pay it back. Some of their banks also got into trouble. The governments of these countries had to ask richer countries in Europe and even the International Monetary Fund to help them pay their debt.
Because of the debt, the value of the euro has gone down, affecting countries all around the world that had purchased it as an investment. A weak currency makes it more expensive for a country to buy the supplies it needs from other countries that do not use the same units of money.
Originally, there were six founding members in the euro zone (the area where the euro is used). In 2004, 10 new countries were admitted, mostly from Eastern Europe. Just last month, Croatia became the latest country to sign the treaty to become a member of the European Union.
The Centre for Economics and Business Research in the UK recently predicted that countries may start switching away from the euro this year. They said this may be the year that the euro “breaks up.”
They also predict that at least one country will leave the European Union. (The European Union is a bigger group of European countries that work together, though not all of them use the euro as currency.)


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