Socialist Worker

What does euro gamble mean?

Issue No. 2188

Speculators have bet a record £5 billion in the last few days that the euro is about to fall sharply in value. Why is this happening?

In response to an economic crisis a government can decide to reduce the value of its currency. This boosts the country’s exports and can reduce the scale of its debts.

But Greece can’t do this – as it is a member of single currency the euro.

Leaving the euro would be hugely risky and likely to provoke an even deeper crisis.

This is increasing the pressure on other weak economies across the eurozone. In particular, Portugal and Spain are in the firing line.

A collapse of the euro would make it more difficult for some governments to borrow money to fund the huge deficits they built up to stop their economies collapsing.

The result is that governments across Europe are planning even more brutal cuts in public spending.

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Tue 9 Feb 2010, 18:13 GMT
Issue No. 2188
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