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Is the euro now in freefall?

During the early days of the credit crunch and worldwide recession it appeared that European markets and the Euro were performing better than many had expected. The UK government was regularly mocked by various European counterparts because of the weakness in the UK economy at the time and the perceived strength in the European Union. However, over the last few weeks the situation has turned full circle and the UK, although still in a fragile situation, looks to be far more secure compared to the European economy as a whole.

As a consequence of difficulties in the sovereign debt market, concerns about unity within the European Union and funding issues regarding a massive bailout fund the euro has come under enormous pressure over the last few weeks. Despite a number of encouraging comments from various EU members such as the German Chancellor and her French counterpart, the euro is still in freefall and investors are concerned about the short to medium term outlook.

The problem which the UK government has is the fact that Europe is one of the major trading partners of the UK despite the fact that the euro is not the main currency in this country. If the European economy as a whole continues to struggle this will impact upon the UK and could tip the economy back into recession. There are so many ifs and buts at the moment and it is very difficult to see what may happen in the short term let alone the medium to longer term.

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