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Eurozone Assured of Bail Out Process and Value of the Euro

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The Eurozone has some countries with severe debt problems: Portugal, Ireland, Italy, Greece and Spain, sometimes known as PIIGS. These Euro countries are looking for and have been assured of a "bail-out" process so that no one defaults on their debt. What do you now think is likely to happen to the relative value of the Euro?

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Euro zone is discussed in great detail in this solution.

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Step 1
If Portugal, Ireland, Italy, Greece and Spain are to be bailed out and have been assured the same means that their debts will be repaid on time. Since, Eurozone has assured these countries that they will be bailed out means that the Eurozone will have to pay for the debts of these countries. Specifically, it is the European Central Bank that will have to pay the debts of these countries.

Step 2
The sources of funds with which the European Central ...

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