Pinning Faith on the Euro
Savage, Shirley S., Global Finance
While the euro's poor performance has concerned the European Union, its neighbors to the east are not quite so bothered. For them it's a win-win situation. The evolution of a single currency is providing a welcome degree of certitude for the economies of Eastern and Central Europe.And its current weak showing can only benefit their trade.
These countries have discovered the worth of pegging their currencies to the euro, the dollar, or both, allowing them a source of much needed economic stability.
Meanwhile, the countries already attached to the Deutschemark are benefiting from the mark's fixed exchange rate to the euro. Croatia, Slovakia, Slovenia, Estonia, and Bulgaria have all put their faith in the mark. But Bulgaria has taken it one step further. In July it re-denominated its lev by literally chopping off three zeroes.Thus its exchange rate now reads one lev to the mark-rather more compelling than the previous 1,000 lev to the mark.
Behind the re-denomination is the work of Bulgaria's currency board, which requires the country's exchange rate to be fixed to a foreign currency. This necessitates more than a quick reshuffle of the figures.The currency board works hard to reform the country's economy, ensuring all the books are balanced. …