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The joys of a cheaper euro

AND now for some good news. The continued weakness of the euro against the dollar since the beginning of 2012 should help offset the hit to Irish exports caused by the eurozone crisis. The bad news is that, following UniCredit's botched rights issue, the mainland European banking crisis is now upon us.

Last week the euro fell to under 83p as sterling hit a 16-month high against the single currency. The euro was also weaker against the dollar, dipping to just $1.28. While the weakness of the euro will make British imports and holidays in the US more expensive, the overall impact for Ireland Inc of a weaker currency will be strongly positive.

Coincidentally the IDA also published its end-of-year statement. This showed that employment at IDA-supported companies grew by a net 6,000 to 146,000 in 2011, making it the IDA's best year in almost a decade.

But it wasn't all good news last week. Far from it. On Wednesday Unicredit, Italy's largest bank, unveiled a massive, deep-discount rights issue aimed at raising €7.5bn of fresh capital to help plug the holes in its balance sheet.

Instead of soothing investor fears the rights issue deepened them, with trading in Unicredit share being suspended on both Wednesday and Thursday after the share price fell by 30 per cent in the aftermath of the rights issue announcement.

With Europe's banks needing to raise €115bn of fresh capital to meet the new balance sheet requirements laid down by the European Banking Authority, the Unicredit debacle does not bode well for the success of the exercise.

Will the worsening European banking crisis offset the benefits of a cheaper euro?

Finance Minister Michael Noonan for one, whose department published worse-than-expected 2011 tax figures on Wednesday, will certainly be hoping that it won't.

Sunday Indo Business