No retreat for euro

13:20, January 02, 2011      

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At the very beginning of 2011, Estonia became the 17th eurozone member -- a ray of hope for the sovereign-debt-hit bloc and an indication that the "euro dream" is still very much alive.

Estonia's accession at such a rough time for the eurozone sends a strong message to the rest of the world that European Union (EU) countries have firm confidence both in the euro and in the integration process of Europe as a whole.

The sovereign debt crises that broke out last year in Greece and Ireland eventually turned into a confidence crisis in the euro. Many people around the world started to question the future of the single currency.

Some doomsday "prophets" have gone so far as to claim that the euro was in demise and that Estonia was in fact rushing to "the funeral" of the currency. Some even predicted that the EU would fall apart with the collapse of the euro.

Mainstream economists, however, rejected such a pessimistic forecast.

Since the euro was adopted on Jan. 1, 1999, the euro has grown into one of the world's main reserve currencies. The currency was not born by accident but was rather an inevitable result of decades of European economic integration. It also squares with the strategic need for the EU to counterbalance the dominating U.S. dollar and seek more clout in the world arena. A result of political compromise between big nations such as Germany and France after World War II and the need for peaceful development, the establishment of the eurozone has played an important role in maintaining the EU's geopolitic and security benefits.

Those who advocate giving up the euro as the only way out of the eurozone crisis ignore the fact that this solution will only wreak havoc on the trade and financial activities of eurozone countries. Moreover, the international financial system and global economic recovery will also suffer an inevitable setback from the collapse of the euro.

Euro-skeptics also turn a blind eye to the strong political will of eurozone member nations in winning an uphill battle for the single currency. The advent of the EU monetary union has advanced the region's economic and political integration, resulting in prosperity and lasting peace on the continent after centuries of unrest. If the euro, the crowning achievement of European integration, ceases to exist, the EU will lose one of the cornerstones of its common house that holds its 27 member nations closely together. Such a political price is too high to pay for European countries.

In fact, during the past months, European countries have shown immense resolve in fighting their debt crises. EU leaders have held seven meetings and a package of anti-crisis measures has been worked out, including emergency bailout programs as well as an active probe into setting up a sustainable mechanism to fend off future debt crises and maintain the stability of the euro. Meanwhile, the EU has launched large-scale austerity measures, improved the coordination of economic policies and strengthened financial supervision among its member nations. It has also produced a new 10-year blueprint, dubbed the "Europe 2020" strategy, with a view to boost "smart," "green" and "sustainable" development in the long run.

It is worth noting that despite the euro chaos, many EU nations, especially those in western and northern Europe, have witnessed a business rebound last year. Meanwhile, consumer and investor indexes show that confidence in the economic recovery is on the rise in major European countries.

The euro, the reserve currency which only ranks second to the U.S. dollar, is playing a significant role in global trade and investment. The stability of the euro will surely contribute to the steady restructuring of the international financial system, to maintaining diversified global currencies, and to the healthy and sustainable recovery of the world economy.

The Chinese government attaches great importance to its strategic partnership with Europe. While some people in the West clamored for the collapse of the euro, China expressed its firm belief in the single European currency and rendered unswerving support. China tried hard to relieve the heavy debt pressure by purchasing sovereign bonds of eurozone countries such as Greece and Spain, and it also widened economic and trade ties with EU countries, helping them to pull out of recession.

The thriving or waning of a currency, especially a reserve currency, depends on the comprehensive strength of a country or a bloc. At present, the EU is undergoing a period of economic and political adjustment, and the pace of Europe's economic recovery might slow down as a result of the austerity measures and the decrease of foreign exports.

Therefore, the euro will see a bumpy road ahead in the short run. Its exchange rate may fluctuate or even drop dramatically under the attack of rapacious traders. Nevertheless, there is no need to be too pessimistic about the fate of the euro.

It is widely believed that a rout of the euro is not an option and the only battle tactic is to keep marching forward.

Source: Xinhua
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