The drop in the euro exchange rate to its most competitive trade-weighted level in over nine years might appear to improve the euro-zone’s growth prospects and reduce the need for the uncompetitive peripheral economies to undertake painful internal devaluations. But the euro’s fall won’t help the periphery to export more to the core and is itself a reflection of the deterioration of the outlook for the euro-zone economy seen over recent quarters. In that sense, it is primarily a consequence of the region’s problems, not a solution to them.
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