Twenty years ago we received the Euro coins and notes as our new European currency. We were told that it will be good for us because each of the countries in the Euro area can trade together without having to worry about the currency risk.
There are two points worth noting about trade. When you look at the trade figures since 2002 you can see that trade has increased nicely even though they were growing before the Euro was introduced. Secondly, Sweden’s export performance was better than Finland since 2002, but the rest of the EU, including Germany, has done as well as Sweden. So currency independence cannot explain the reasons for Finland’s poor performance. Furthermore, Finland’s performance was clearly extraordinarily awful after the financial crisis, which was probably due to too much emphasis on fiscal austerity imposed by our various governments and weaker export performance after 2004 when Nokia started its downward spiral.
GDP growth rates also tend to confirm that the Euro is not a decisive factor for trade or economic growth. Finland, Sweden, Germany and the whole of the EU enjoyed the same ups and downs in GDP growth rates over the last 20 years. The noticeable detail is that Finland had lower growth rates most years after the financial crisis, a factor that is probably also caused by too much emphasis on fiscal austerity, a golden rule for the right:
… and if you bring the USA’s GDP growth into the picture, you will see below that they have not shown any great difference in growth compared to the EU, even though they tried to put themselves First! Chinese growth has been in a completely different world… However China has seen a strong fall in growth. The lack of water resources and energy, combined with higher labour costs and political uncertainties will put further limits on growth in the coming decades.
The most interesting fact about the Euro for Finland and for many EuroZone nations is that it has actually been the strongest trade currencies around with just one big exception. In other words the Swedish Crown, ÙS Dollar and Pound Sterling the Euro have all devalued against the Euro! Only the Chinese Yuan has revalued over this same period.
The other big surprise when looking at currencies is Turkish Lira. These have been unlucky folks in Turkey, and are they suffering…
The government there has invented a new meaning for the “D-word” in the currency markets . Back in the old days economists criticised those countries like Finland and Sweden that liked to “Devalue” their currencies to remain competitive in the export markets.
The Turks have chosen a leader, Mr. Ergadon, who has not only caused the currency to be devalued – no – he has actually “Destroyed” the Turkish Lira. It looks a bit like the share prices of Deutsche Bank and Citibank.
There is almost nothing left – now is a great time to visit Turkey with a few Euros in your pocket, although inflation has really eaten up wages and pensions. You can be sure that Mr. Ergadon will not be winning any new elections any time soon.
Conclusion – the Euro has probably been a good deal for banks, exporters and tourists… but probably a little expensive for taxpayers because our central bankers and banking regulators are probably bonkers, but that is another matter for another article…