Euro clatters to four-month low against US dollar

The euro has hit a four month low and is likely to collapse even more as squabbling politicians in Greece face another election after failing to agree who will lead a government.

The election in June could well herald the country’s departure from the eurozone as the question to voters is not so much who to elect but whether they should vote for or against austerity measures and sticking with the euro.

The underlying problem for Greece is traditional economic tools to manage a faltering economy simply are not available because the government is not in control of the country’s currency exchange rate.

Interest and exchange rates are governed by richer countries in the eurozone, and where Greece could have devalued the drachma in the past to ride out an economic storm, the option is no longer available.

Departing the eurozone for economic obscurity is an option – but while the will-they-won’t-they drama plays out, the economic indecision that has plagued Europe for months continues to damage the euro.

France reckons that the country will have to pay €66 billion if Greece leaves the eurozone.

The big question for new president Francois Hollande and Angela Merkel in Germany is whether the financial damage is easier to bear if Greece stays in the euro.

The US dollar and the Pound have profited from the euro debacle and are likely to strengthen, but in the long run Europe is a big trading partner for both.

Certainly the fear for the UK and the Pound is the euro will drag the economy down even further.

Putting a price on the euro against the dollar and pound is difficult as the gap widens by the hour.

The euro stands at €1.2747 (Up 0.14%) against the dollar and 0.7998 (Up 0.48%) against the Pound, while the Pound v dollar rate is $1.5938 (Down 0.35%).

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