Main focus of Friday, July 13, 2007

The Euro keeps on climbing

The euro reached a record high exchange against the dollar on Thursday, July 12th, at $1.3798, after having already set a record last Tuesday. The European press sees no danger in this rapid appreciation and continues to endorse the independence of the European Central Bank (ECB) to set the course of interest rates.

Cinco Días - Spain

"The euro is the European project's biggest success of the last decade", writes Miguel Ángel Aguilar. "Today, the euro has attained a record exchange with the dollar, it has been adopted for all sorts of international transactions, and the list of countries who want to replace the dollar with the euro is growing. Nothing is left of the arguments of those who opposed the common currency. ... Little by little, the euro has attained parity with the dollar, and has continued to progress, with some natural variations, right up to the current level of $1.37, which marks a new record. But even this evolution, which contradicts all the previous dark predictions, doesn't discourage those who forebode dark times ahead, who see nothing but the disadvantages of the appreciation of the European currency." (13/07/2007)

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Le Figaro - France

Stéphane Marchand takes issue with Nicolas Sarkozy's attitude towards the supercharged euro. "The euro is too strong in relation to other currencies, exports have plateaued, growth is stifled and the European Central Bank [ECB] would be well advised to reduce interest rates to open up some breathing room. ... This is the substance of what Nicolas Sarkozy says, and its what public opinion in France likes to hear. The head of state is very alone in his analysis and the other leaders of the eurozone, led by Angela Merkel, are perplexed, even agitated: why does the French president persist in portraying the economic situation in such a different way? ... Since the launch of the euro, a zone has formed that has more than 12 million employees - 3 million more than the United States. ... At a time when France has come back to the European stage, thanks to a simplified treaty, the anti-ECB charge risks to turn it back in on itself." (12/07/2007)

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Jyllands-Posten - Denmark

The newspaper warns of the European Central Bank's (ECB) plans to raise interest rates. "The European Central Bank is a relatively young institution, and as such it unsurprisingly has both the desire and the duty to prove that it's more than just the extended arm of Europe's politicians. But when ECB President Jean Claude Trichet indirectly threatens to raise interest rates just because the new French president has announced he doesn't want to stick to the EU's economic regulations, one has to ask whether perhaps the bank's independence complex is not gaining the upper hand against common sense... A stronger euro, which would be the direct consequence of a further increase in interest rates, would be a terrible blow to Europe's competitiveness. For this reason the ECB should suppress its desire to demonstrate its independence by increasing interest rates." (12/07/2007)

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The Economist - United Kingdom

"Mr Sarkozy's calls for a 'European economic government'. This remains a mushy concept. ... As far as the Eurocrats can make out, economic government means giving elected national politicians the last word over broad swathes of EU economic policy, including the exchange rate and budget discipline, while not actually scrapping such totems as the independence of the European Central Bank (ECB)”, writes the weekly. "Mr Sarkozy will face resistance if he seriously pushes for greater political oversight of economic policy, starting with the ECB's mandate to concentrate on price stability. In the words of one senior Eurocrat: 'Putting exchange rates at the service of growth comes very naturally to the French, … but it sends a shudder down German spines, because it makes them think of runaway inflation.' In German memories, inflation helped to pave the way for Nazism, meaning that price instability can be a threat to democracy itself.” (12/07/2007)

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More from the press review on the subject » Fiscal Policy, » Tax Policy, » Europe

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