Monday, February 05, 2007

French want Euro to go

The French are experiencing buyer's remorse:
A majority of French people believe the switch to the euro five years ago was bad for their country, according to a recent poll, which suggests the French blame the common European currency for damaging economic growth and causing price hikes.

The TNS-Sofres survey published on Wednesday (27 December) by Le Pelerin magazine showed 52 percent of respondents said giving up the franc for the euro has been "quite bad" or "very bad" for France, up from 45 percent three years ago in a similar survey.
Uncompetitive employment laws, a growing African underclass (blacks now make up almost 4% of the French population and Muslims close to one-tenth), seminal affirmative action, and an aging population aren't doing French economic growth any favors, either.

But, unsurprisingly, a broad-based currency like the Euro is problematic for France, as its citizenry enjoy a higher standard of living than the average resident of the Eurozone (the nations the Euro operates in) at large. Consequently, stuff should be nominally more expensive there than in Portugal. But since the Euro's valuation is tied to the amalgamated economy of the entire Eurozone, the purchasing power of a Euro will grow (or adjust) at a pace representative of the larger Eurozone economy, not the relative affluence of the smaller French economy.

With France's stagnant economic growth, eventually the Euro will seem less painful, as its acuteness will shift from wealthier Eurozone economies to those that simply grow the fastest. But being only eight years old, and having been adopted by more, mostly poorer countries since its inception in 1999, its purchasing power within the Eurozone is still undergoing a settling process that is favorable for weaker economic acquisitions (and there are several relatively poor countries slated to adopt the Euro over the next several years) and unfavorable for the developed economies already using it. It is similarly unsurprising, then, that in Great Britain and Denmark the Euro is unpopular and unlikely to be adopted in the foreseeable future, and that in Germany and France (and possibly Italy)--like GB and Denmark, among the more affluent EU members--a majority of the population favors a return to the old national currency.

If I was French, I'd be among the plurality favoring a return to the Franc. Let poorer southern and eastern European nations peg their national currencies to those in developed countries to ease concerns about abrupt currency fluctuations. We can help offer them stability without actually affecting our buying power.

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