A weak euro irritates the United States, exacerbating its trade deficit and making it harder to sell U.S.-made products in Europe. Going into a G-7 finance ministers meeting Tuesday in Brussels, Belgium, U.S. Treasury Secretary Lawrence Summers made no secret that he intended to talk about the euro. The weak euro also hurts European homebuyers by pushing up mortgage rates, which are linked to rates on long-term bonds. Rates have climbed because of investor worries that higher prices Europeans have to pay for imports will reignite inflation, which is almost flat now. And if the euro falls too far, it could spur the kind of investor flight that hit other parts of the globe over the past two years.
More people are likely to bail out.
The European Central Bank, which sets monetary policy for the euro countries, insists the currency's fall is temporary and nothing to worry about. All rights reserved.