Internal Protectionism Rearing Its Head In The EU

The Eurocurrency is making new highs, and central banks are diversifying reserves from dollars to the Euro, while media pundits bemoan the fate of the dollar. Forgotten in the bullishness is the newness of the Euro and long history of currency instability in Europe. Internal stress among the EU countries is just below the surface. Some of these stresses bubbled to the surface when Nokia announced the closure of a factory in Germany to be replaced by a factory in Romania where the workers cost 10 times less. Pajamas Media writes:

The Finnish company Nokia’s decision to relocate a major factory from Germany to Romania due to cheaper labor has led to a German uproar, writes The New European. “Quite an ironic twist for Germany, such a staunch supporter of the ‘European project.’”

From the New European:

A huge scandal started in Germany last week, when the Finnish cellphone manufacturer Nokia announced that it will close down the 2,300 employees-factory in Bochum and relocate it to the small Romanian village Jucu. Strikes, ridiculous boycotts and angry political statements followed immediately after and are still hopelessly trying to change Nokia’s mind. With no success so far.

Apart from this keep an eye out for calls from some Italian politicians to pull out of the currency as the global economic slowdown combined with the strong Euro begin to cause economic distress in Italy.
Politicians from all over Europe are already complaining about the "unfair" exchange rate with China. Trichet and the ECB officials are still talking tough but pressure is building on them to ease. As soon as the German officials cry for an ease Trichet will have proved his manhood and will relent. When that happens the Euro is a great short candidate.