The euro, which has become one of the world’s strongest currencies since its introduction over a decade ago, is now down 5 percent against the dollar this year.

 

The euro’s decline picked up speed when the European Commission’s statistical office revealed in mid-January that Greece had been submitting false data to calculate its budget deficit. (Late last year, Greece stunned investors by saying that its government deficit would be 12.7 percent of its gross domestic product, not the 3.7 percent the previous government had forecast earlier).

 

Greece’s problems, and those looming over its neighbours, have laid bare the dangers of divergent fiscal and political policies in the euro zone, calling into question the grand European experiment of squeezing 16 disparate countries into a monetary union, said the New York Times.

 

"We have a centralised monetary policy, but we allow budgets and wages to move in different directions," said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, Jos Manuel Barroso. "Without a political union, in the long run the euro zone cannot last."

 

Indeed, as core economies like those of France and Germany show signs of economic recovery, Greece, Portugal, Ireland and Spain are just entering savage recessions. Spain, the largest of the peripheral economies, announced that the number of its unemployed had reached four million   the highest in its history and warned that the country’s deficit might be worse than previously thought. 

 

As growth slows and debt rises in these countries, government largess for university fees, secure government jobs and lifetime pensions will come under increasing pressure.