Mini-Case 
Euro Appreciation Hurts Southern European Exports
Southern European countries (e.g., Spain, Greece, Italy, and Portugal) traditionally export lowtech manufactured items such as textiles, toys, and footwear that are in direct competition with inexpensive goods from China. The steady strengthening of the euro from 2002 through 2004 made exports from these countries more expensive and less competitive, costing them global market share. Unfortunately, the strong euro also came at the same time as relatively high inflation in southern Europe, especially Spain, Greece, and Portugal. By 2005, the euro’s appreciation had driven many exporters in those countries to shift production to China and other countries with lower labor costs and weaker currencies.