ECB official downplays euro strength | Business| Economy and finance news from a German perspective | DW | 11.10.2010
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ECB official downplays euro strength

The rising strength of the euro, which has been trading at $1.40, has many economists worried about future demand for European exports. But a senior official at the European Central Bank says they are overreacting.

Euro symbol in front of ECB headquarters

The ECB isn't worried - yet - about the strong euro

Yves Mersch, Luxembourg's representative in the governing council of the European Central Bank (ECB) is not concerned about the current level of the euro.

"One cannot look excessively at bilateral exchange rates," Mersch said in an interview with the business newspaper Financial Times Deutschland. "What is decisive is the effective exchange rate and there in the third quarter we were not above the second quarter."

Optimistic about growth

Mersch also warned about reading too much into the combination of the euro's rise and rising interbank rates. "We have a very stimulating monetary policy and we are still providing unlimited equity," he said. "This applies all the more so when one sees that provision of credit has all but reached the turning point."

Person inserting euro banknote

Financial markets are banking on the euro but exporters are concerned

At the same time, Mersch spoke optimistically about growth in the eurozone. "For the third quarter, we indeed have already seen some data in the eurozone that indicates a positive surprise," he said. Economic growth, he added, is expected to be between 0.4 percent and 0.6 percent.

Mersch also rejected the notion that that ECB would not be able to continue with an exit from its current accommodative monetary policy if other central banks did not follow. "We do not at all feel blocked by the path of others, or like a hostage," he said. "We are big and grown up and take the path that is seen by us as necessary."

Author: John Blau (Reuters, AFP)
Editor: Sam Edmonds

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