Some time ago some economists identified the "pain threshold" for the Eurozone at 1,37-1,4 dollars: once this level has been exceeded, we are now at an exchange rate of 1,3562, the strength of the euro is starting to damage the competitiveness of exporters. The actual threshold obviously depends on GDP growth (although a change to 1,37 can be painful even with 4% growth) and the super euro does not affect all countries in the same way. If Germany can hold out longer, for Italy the exchange rate should not stray from 1,15-1,20. What are the problems of a strong euro for our country? Many, from the most expensive petrol to export difficulties.
1) Hotels, restaurants and shopping in the USA (or in other countries with a weaker currency than the euro) are more convenient and attract tourists. If the traveler rubs his hands, the national economy is a little less so, which sees a share of its domestic consumption fly away to feed the overseas economy. Furthermore, the devaluation of the greenback against the euro could push up the price of oil which is quoted in dollars, with repercussions on the price of petrol, a further burden for domestic consumption.
2) the most evident effects, however, are had on exports: with a strong euro, goods exported outside Europe are more expensive. Since the European countries have a different competitive position, the most penalized countries are also those most in difficulty, including Italy. In other words, the exchange rate can create some difficulties for those countries that most need foreign demand. Thus, while for some countries the appreciation of the euro is a relatively important variable, for others it is a factor that can have an impact by curbing exports, at a time when domestic consumption is languishing and more and more reliance is being driven by exports for restart growth. In any case, although there may be a recovery in exports, it is illusory to think that it could be so marked as to support the economic cycle on its own.
3) It should also be noted that the appreciation of the euro is not symmetrical, ie uniform with respect to all currencies. Depending on the country that devalues (India, Japan, etc) a production chain is affected or not. For example, the devaluation of Japan, linked to the auto industry, hits the German economy the hardest. For Italy in particular, the danger is that some emerging countries, by devaluing, will hit some sectors more than others.
4) Finally, the risk is that the tensions of a phase of precarious balances are unloaded on the spreads of government bonds. The devaluation of emerging currencies (and the related appreciation of the euro) derives from the change in monetary policy by the Fed. With the announcement of the future tapering, investors reviewed their risk exposure and exited emerging countries (which have devalued, capital movements bear most of the responsibility for the exchange rate). For now, Italy has not been affected by capital flight (which would have increased spreads on BTPs) because at the moment it still enjoys the protection of the ECB, otherwise the storm would have hit all high-yielding countries, including Italy. Which if it had been outside the euro would also have devalued.
