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The euro equals the dollar, the European economy is heading for recession

Politiko 2022-07-13 09:15:30

The euro equals the dollar, the European economy is heading for recession

The euro and dollar have reached parity for the first time in 20 years, signaling the market's assumption that the European economy is heading for a deep recession as a result of Russia's invasion of Ukraine.

Today, 1 euro is equal to 1 USD.

The change means that European companies and consumers will pay more for the goods and services they import, while European exports become immediately cheaper on international markets, reports Euronews .

The euro has experienced a dramatic loss of value since early February, when it was above $1.13.

The decline accelerated in recent weeks as fears spread that Russia, the EU's main energy supplier, would completely cut off gas flows in retaliation for Western sanctions.

So far, 12 EU countries have experienced a total or partial reduction in Russian gas.

Supplies from the Nord Stream 1 pipeline were halted earlier this week for a scheduled 10-day maintenance. It is unclear whether the Kremlin will order the suspension to be extended beyond that deadline and become indefinite.

All eyes will be on the euro to see if it ends up falling below the US dollar. The last time this happened was in November 2002, when the euro was worth $0.99.

Since then, the euro has enjoyed a steady rise, reaching almost $1.60 in the summer of 2008, when the Great Recession was wreaking financial havoc across the US.

But Russia's full-scale attack on Ukraine has turned the tables, taking a huge toll on the EU economy. The invasion has upended energy markets and driven gas bills to all-time highs.

The sudden blow has caused record inflation across the eurozone, hitting 8.6% in June, along with a gradual slowdown in economic activity.

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