Why is the euro rising? Let's try to figure it out

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

Russian residents are closely following the changes in the bi-currency basket (even those who do not have foreign currency savings), because they understand how much their lives are connected with these two indicators. But economics, unfortunately, is not algebra and geometry: there is no clear and unambiguous answer. The strange thing is that the ruble is falling against only the euro. Against the dollar, since July, our national currency has grown by 1.5-2%.

Who is loosening the deck?

The question of why the euro is growing and the dollar is falling against the ruble is easy to answer. Even the laziest could not help but notice from the news reports that the great power in the face of the United States has put in so much effort that it is surprising not that the exchange rate is falling, but how slowly it is happening. But why the euro is growing (2013), perhaps the American situation will not give an answer.

In connection with Russia's accession to the WTO, the high exchange rate of the ruble for the Russians themselves will be a tragedy. But the expensive euro will have an unfavorable effect on the consumer basket of a Russian. howpractice shows that our population likes to buy imported goods at a low price. And it seems profitable at first sight. After all, many imported goods are much cheaper than local ones due to low export duties. Therefore, importers will benefit from the high exchange rate of the national currency by flooding the country with cheap foreign goods. And what the domestic manufacturer produces will remain in warehouses.

Where does this lead to?

Enterprises will start to close - our partners. Or our own factories, having lost the competition with cheaper and better imported goods, will also close. A rhetorical question arises: "To whom to give loans, to whom to build houses?"

Economic protectionism, in a reasonable amount, has always been useful for a country that uses an instrument to protect its own producer. Therefore, the state, to the best of its ability, maintains a low exchange rate of the ruble so that the economy does not collapse.

Tough currency

In other words, the answer to the question: "Why is the euro rising?" extremely simple. The EU countries artificially inflate the exchange rate so that their own economy does not collapse during the crisis. The name of this phenomenon is devaluation. Most likely, maintaining the exchange rate of the ruble is expensive for our Central Bank, but everyone knew what Russia's accession to the WTO would cost. Recently, oil prices have stabilized, there are no sharp jumps in dynamics - this is an obvious plus. But such fluctuations also affect why the euro is rising.

If you go fromfrom the opposite point of view, a strong euro currency is not so beneficial for the Eurozone itself, for the same reason that we do not need a high ruble exchange rate. And then it becomes not entirely clear why our civilized neighbors do not take action. The only currency that is behaving predictably is the pound sterling, rising slowly against all currencies. Now it is clear why the far-sighted Britons did not want to change their pounds to euros.

Why is the euro rising slowly?

This is facilitated by the growth of the public debt of Germany, the main donor of the Eurozone. Plus, the main meaner of the Eurozone is France. The state simply raised taxes (everyone remembers how Gerard Depardieu became a Mordovian farmer?). A control shot was the increase in VAT in Italy (up to 22%). In hot Italy, not all people are as patient as the Russians. Recall that in the economic history of Russia, VAT was applied simultaneously - 20% and sales tax - 5% (total 25%). The ingenuity of Russian bankers sometimes surpasses the Jewish one, since they decided to indirectly increase another 1% to 25%. In fact, we got more, since at first VAT (20%) was added to the price, and sales tax (5%) was calculated on the resulting amount, and instead of a net 25 percent, we paid 26%.

Neighbors also suffered

But the question of why the euro is growing, arises not only in Russia. The Ukrainian hryvnia also feels a negative trend for itself. This was influenced by the statement of the head of the US Federal Reserve System, Ben Bernanke, that measures tostimulating the dollar exchange rate are postponed to November-December. And the lever that lowered the dollar and at the same time played to increase the euro was the growth in gold prices (3.5%).

It is worth remembering that economic laws are a set of factors that affect the world market, and one of them will never be decisive for global changes. It remains only to observe further developments in the economy and in the world.