The complexity in the Eurozone branches from productive concentrations and different country strategies and focuses its importance on the four biggest countries of this monetary union and on a series of major differences between the four biggest member countries. The recent rise of the value was in the short term disrupted by the subprime crisis, however there are many reasons for a recommencement of a clear appreciation of the euro against the US dollar and the Japanese yen.

In cases when a country has imperfectly distinguished, refined production, its exporters are normally forced to decrease their prices, i.e. in their export margins when the country’s currency appreciates, in order to recollect their market shares. In hat sense Germany has the highest increase in the ratio related to the export price over the unit wage cost of all countries, which shows its strongest product diversification. There are several reasons for this and the first one is that the central American financial institution, the Federal Reserve, is likely to remain more responsive than the European Central bank regarding the event of an economic slowdown or financial crisis, since current developments in monetary policy and market outlooks seem to confirm this. Indeed, the slowdown in growth will be stronger and more durable in the United States than in the euro area. There is a collapse in construction activity in the US due to the very high stock of unsold houses, while at the same time Eurozone countries witness a slight expectable weakening in construction activity after a period of strong growth.

The United States is finding it more and more difficult to sell securitized assets to the rest of the world, since non-residents will be less attracted to assets issued in that country because a significant percentage of the US external deficit was financed by the purchase of corporate bonds by non-residents, as well as a substantial portion of these obligations. Secondly, despite the acceleration of the accumulation of foreign exchange reserves, emerging countries seem to accept a faster depreciation of the dollar, so the green currency is becoming more and more difficult to stabilize. Regarding Japanese, there is a need to realize that that country cannot continue regular processes with a strong yen. With the decline in real income of Japanese households, the only drivers of demand are exports and associated investments, which weaken with the US slowdown and all of these explanations were add to the strengthening of the probability of the situation of appreciation of the euro against the dollar and the yen.

The big burden of imports in Germany comes from outsourcing to emerging countries and it is enough to perceive the evolution of imports of intermediate goods, since the countries that have made extensive use of outsourcing. Therefore, they take advantage more from the drop in import prices due to the appreciation of the euro. The appreciation of the euro reduced the import prices of the four biggest Eurozone countries during 2002 and 2003, so the change in the amount of the sensitivity of exports to changes in the euro is a function of concentration.

Countries that concentrate in distinguished, high-end products typically have lower export price elasticity and lower export trend growth. The appreciation of the euro during 2002 and 2003 also impacted the markets of other three countries, i.e. France, Italy and later Spain much more than it was the case in Germany. This has shown that there is a rule in this process, where, if a particular country has a big, progressively growing non tradable service sector, it is to some extent resistant to fluctuations in the euro. The differentiation of Spanish industry and market shows that it is definitely not the case in that country.

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