The European Union’s single currency continued to slump, despite a $1 trillion rescue loan package, as traders and investors remained skeptical about the fiscal strength of euro zone members like Greece and Portugal.
The euro hit a 4-year low against the dollar on May 17, and there has been speculation about whether the current currency union format will survive. Spanish newspaper El Pais reported that French President Nicolas Sarkozy threatened to pull France out of the euro if an aid package for Greece was not delayed – something officials later denied.
And Harvard economist Ken Rogoff told CNBC the EU should probably have moved for the orderly exit of Greece and Portugal for the stability of the monetary group.
If countries left the euro, old currencies would have to be revived. But where would they trade? Each country entered the euro with an “irrevocable conversion rate.” The IMF uses the rates in its World Economic Outlook to compare and transform data prior to 1990. Using those rates and the latest euro close of $1.236 on May 14, we can see how those currencies would trade against the greenback.
By Kim Khan
Posted 17 May 2010