IS THE EURO UNDERGOING A CRISIS?

Abstract

The objective of the paper is to assess, whether there is a euro crisis
under way. A currency crisis concept - viewed as a 25% depreciation of the
EUR/USD exchange rate - has been applied, together with a crisis concept as
a long-term depreciation of the USD/EUR exchange rate, and finally a crisis
as the impaired international role of the euro. The following are examined:
share of the euro in foreign exchange reserves, importance of the euro in the
financial markets, expansion of the euro as national currency, and application
of the euro as reference currency within various exchange rate systems. The
paper comes to a conclusion that neither of the aforementioned indicators
evidences a euro crisis. However, a potential future euro crisis may be
invoked by a debt crisis within the euro area. This is preconditioned by
sufficiently strong fundamental reasons for investor’s skepticism about the
debt crisis resolution and ability of the ECB to prevent the euro exchange
rate depreciation.