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EU Center to Examine Situation of the Euro

May 9, 2011

Today is May 9th, which is Europe Day across the 27 member states of the European Union.  On this date in 1950, Robert Schuman outlined his idea of creating an organization of European countries that would work together to solve common problems.  Since then, the EU has evolved from six members in the European Coal and Steel Community to the European Union of today with 27 members with a much larger mandate.  The EU has made some major changes to the face of Europe, encouraging countries to remain on the path to democracy, breaking down international barriers, and even creating a single currency.

Winning Poster from the EU Center's Poster Contest

Unfortunately as the EU has expanded and gained more powers, it is easier for events on one side of Europe to influence other parts of the continent.  May 9th now also marks the one-year anniversary of the Greek bailout.  Since then, the EU has seen its ups and downs (as symbolized by the euro/dollar exchange rate charted below), with two more countries requesting bailouts.  However, the euro has still managed to appreciate by 13% in the last year, peaking at $1.4882 on May 4th despite these downturns.  As previously written on this blog, one of the reasons that the euro has strengthened so much is that while three small countries have grabbed headlines with their bailouts, major European economies such as Germany and France are making strong recoveries from the global economic downturn.  For instance, today also marks a new record for Germany, as its exports surged in March to a record of almost €100 billion.

While this is good news for Germany, as the graph shows, this news was drowned out by rumors that Greece will be leaving the Eurozone.  As a result, the euro fell from 1.4814 to 1.4397 (about 3%) in two days.  In fact, The Economist had called for Greece to orderly restructure its debt on April 20th.  In order to help Indiana leaders understand the current state of the euro and what it means for our region, the EU Center, along with the International Center and PNC Bank, will be sponsoring the “Euro and Its Effect on the Midwest” on May 13th in Indianapolis.

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