Euro Consolidates as Exports Dive, Warning That Ireland May Require IMF Aid

The Euro-zone's trade surplus narrowed to 1 billion euros in August from 6 billion euros, as exports fell a seasonally adjusted 5.8 percent from July, the sharpest drop in seven months. European exporters have two main forces working against them: lackluster global growth and the appreciation of the euro. Indeed, Eurogroup Chairman Jean-Claude Juncker said today that “there’s a risk” the currency's gains could impede the region's recovery and that the topic will be discussed at an October 19 meeting in Luxembourg. Furthermore, European Central Bank President Jean-Claude Trichet said on Thursday that it is “extremely important” that US authorities pursue a strong dollar policy, calling excessive currency volatility “an enemy.”

Meanwhile, the Irish health and finance ministers offered bleak outlooks for the nation ahead of the December 9 announcement of massive budget cuts as they experience the deepest recession in the Euro-zone. Finance Minister Brian Lenihan said Ireland was “on the road to ruin” if it failed to reduce spending and control mounting debt, and called the budget “a test of our ability to rise above our difficulties” while warning that the prepared cuts would look like a “picnic” when compared to the measures that would be made necessary by waiting. In fact, Health Minister Mary Harney warned that if the government does not slash the budget, “then others will come in like the IMF and overnight they will make decisions,” suggesting that in such a case, the health budget alone could be cut by 30-40 percent. All told, it’s clear that Ireland is in the worst position of the Euro-zone member nations, and presents a risk to the stability of the currency.