After the summer holidays, we find ourselves with two worrying news items in the panorama of the European economy.

On one hand, we continue with the weakness of the currency of the European circle and also the increasing cost of oil. The euro seems to be losing credibility with the European Union. The new currency adopted by eleven countries of the European Union continues to lose value with each passing day againsta the other two strong currencies in the world: the dollar and the yen. In a little over a year and a half, i has lost 26% of its value with respect to the dollar and 30% with respect to the yen. Additionally, it has lost 12.5% with respct to the British Sterling.

The European Countries thought that the Euro was going to be a competitor to the other 2 global currencies (the dollar and the yen). However, the reality has been different.

Those who have bet on the Americans currency have had great profits last year as well as in the current year. The Americans have found a magnificent form of financing in the markets of European capital, with lower interest rates and when the capital of the loan is paid back in Euros, they also benefit because they pay fewer euros.

The European countries have to take measures to recuperate the strength of the euro. The American economy is more attractive for investing than is the European economy. The principal advantage of the loss of value of the euro is that it facilitates exportation, but in the other hand, it makes importation more expensive. Additionally, in the long run, a weak currency implies a constat loss of purchase power of the Europeans against those outside of the Union. The Central European Bank has 2 tactics which they can take: buying euros, raising interest rates of a combination of both. The economy of the Canaries is also related to the British currency. The pound is very strong. This suits the investment of British tourism in the Canaries but it is unknown what is going to happen in the future with the countries that are not within the euro. That is, England, Sweeden and Denmark.

Oil is also worrying the western economies. The price of a barrel surpassed 30 dollars. The oil on top of this price will reach a half point more of inflaction for the Spanish economy, a minimum increase of one point in interest rates, and a reduction in the projected growth of the GDP this year. It could also have negative effects on investments, salaries and employment.

The producing countries have the western countries concerned as they face the negative expectations that the cost of oil will continue to rise.

For the Canarian economy, evidently everything has its repercusions. The cost of expensiveoil signifies a rise in the price of air travel. If one adds to this the economic problems of the countries that send us tourists, we can be assured that the future will not be rosy.

The European countries need to reflect upon these two important economic issues (the euro and oil), because the combination of a weak euro and expensive oil could cause significant, long-term economic problems.

The solution that the Central European Bank has had of raising the interest rates does not seem to have been magic solution to the problems of the weakness of the euro. Europe is finding it difficult to compete with the American economy that is currently more competitive and attractive than the European economy.