The Euro Grows Up - And Down

Americans who booked a summer vacation to Europe months ago will be delighted to learn that the euro has fallen substantially since then, reducing the cost of museums, pastries, and pensiones.

The reason is that this newish currency, shared by 12 of the European Union's 25 countries, is reacting to unsettling news on the Continent. But the plus side of this fall is that it shows the euro finally coming into its own, reflecting EU politics and economics, instead of reacting largely to what's going on in the US.

Only six years old, the euro has had ups and downs in response to trends in the American economy. As US budget and trade deficits worsened, the dollar's been weak, and the euro, in contrast, strong. But the euro has fallen more than 10 percent since its peak at the end of 2004. French rejection in May of the proposed European Constitution - and the political uncertainty about Europe's future which this sowed - pushed the euro down sharply.

So, too, did the fiasco of this month's EU summit, which broke up without a budget agreement. Calls by some leaders in Italy to ditch the euro and return to the lira have also caused the euro to go wobbly.

Before this year, the euro strengthened despite a multitude of woes in the "eurozone" family. Countries such as Germany, France, and Italy haven't been able to stay within the shared currency's financial requirements - they're busting them with bigger budget deficits at home. And these nations' economic growth is slow. Italy's actually in a recession.

Sluggish growth, budget deficits, and a Europe doubtful about its identity aren't very encouraging. But at least the euro's more accurately representing the continental scene.

In some ways, that can have its rewards - in the form of increased exports, which could be spurred by a lower euro and by more American tourists.