PARIS (MNI) – European Central Bank Executive Board member Jose
Manuel Gonzalez-Paramo said that the decisions taken by European Union
leaders at their summit on November 9 had made him more optimistic about
the future of the Eurozone.
In an interview with France’s business daily La Tribune, published
Monday, Gonzalez-Paramo also said that people should not doubt the
durability of the euro as a viable currency.
“The qualitative leap achieved by governments to reinforce the
economic pact at the heart of the union, notably by better governance of
budgetary discipline and of competitive imbalances, is an important
advance,” he said. “From this point of view, I am more optimistic today
than a few months ago.”
The ECB board member said that while Europe is currently
experiencing “difficulties due to imbalances of public finances and
problems of competitiveness in some countries,” the euro itself is not
the problem. “The euro is not only a solid economic reality but also the
expression of a certain idea of Europe: that which consists of sharing a
common destiny,” he said.
“The euro is not just an economic experiment; it is much more, and
we must not forget it,” Gonzalez-Paramo added. “We should be confident
in the future of the euro. This currency is here to last.”
Paramo said the euro’s exchange rate, which is still well above its
initial starting point of $1.18 despite recent weakness, has held up
well because of several factors, including the ECB’s price stability
policy, the “fragility” of the United States, the tendency of central
banks around the world to diversify their foreign exchange holdings, and
the more recent phenomenon of financial institutions selling assets
abroad and repatriating euros.
He argued that despite the sovereign debt crisis, which has raised
sovereign borrowing rates in many Eurozone member states, the outlook
for long-term rates is ultimately based on the economic fundamentals.
And those, he said, are still better in the euro area than in the UK,
the U.S., or Japan — whether in terms of employment, industrial
production, the credibility of monetary policy, or the ability of
governments to control their public finances.
Gonzalez-Paramo declined to comment on the euro’s exchange rate,
other than to repeat the standard line that exchange rates must be in
line with economic fundamentals and that excessive volatility is bad for
Currency rates must be determined by the market, and “there is
therefore no ‘good’ exchange rate,” he said. If the fundamentals change,
the exchange rate must also change, he added. “If I focus on recent
years, and notably 2011 as a whole, I believe that the euro’s exchange
rate has moved for the most part in line with the fundamentals.”
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