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Blessing or burden? A decade of the euro

Friday, December 30, 2011 - 02:29

Dec. 30 - Ten years after Germany started using the euro, the single currency is facing a make or break year and economists say the euro hasn't worked out as planned. Joanna Partridge reports

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Ten years ago - fireworks in Berlin welcomed in a new year - and a new currency. Germany, along with 11 of its European neighbours, began using the euro on the 1st January 2002. The new single currency had both its fans and critics at the time. There were worries prices and unemployment would rise - or even that the currency would fail. A decade on - the euro is used by over 300 million people. But the debt crisis in the euro zone has called the currency's longterm prospects into question. Hans-Werner Sinn, President of Germany's Ifo - Centre for Economic Research, says there's no easy way out of the current crisis. SOUNDBITE: Hans-Werner Sinn, President of Ifo (Centre for Economic Research), saying (German): "Unfortunately things didn't go as well with the euro as we'd expected. At the moment, the euro is in an existential crisis. Some countries have overextended themselves and their inflation using inexpensive credit pre-euro and pre-crisis. They're now left with far too high wages and prices, they lost their competitiveness and have huge foreign trade deficits which have to be financed. And in order to become competitive again, they must lower their prices or we must raise ours." Germany underwent a period of tough reforms during the last decade as it took on high unemployment and low growth and fought to regain its competitiveness. Now Europe's largest economy is also the continent's strongest. Which means it's effectively become the paymaster for the weaker euro zone members who've needed bailouts. Germans have mixed views about the currency. SOUNDBITE: Ralf Schmidt, Passer-by, saying (German): "I have no trust in the euro whatsoever because, if you look at the economy, promises that haven't been kept, the global economy." SOUNDBITE: Inge Krueger, Passer-by, saying (German): "I don't have any negative feelings. I don't have any worries about the downfall of the euro. I'm thinking positively." 14 out of 20 economists polled by Reuters at the end of November said the single currency wouldn't survive in its current form and many leading companies say they're already starting to plan for a worst-case scenario of euro zone break up. So ten years on from the celebrations, 2012 looks to be a year of reckoning for the currency which is supposed to represent European unity. Joanna Partridge, Reuters

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Blessing or burden? A decade of the euro

Friday, December 30, 2011 - 02:29