Sunday December 21, 2014 Search
Weather | Athens
17o C
10o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Draghi’s patience snaps on euro as ECB threatens response

Stefan Riecher & Rainer Buergin

Mario Draghi’s patience with the euro has snapped.

“The strengthening of the exchange rate requires further monetary stimulus,” European Central Bank President Draghi told reporters in Washington on April 12. “That’s an important dimension for our price stability.”

The warning, which prompted the biggest drop in the single currency in three weeks, marked the strongest stance yet taken by Draghi since he and fellow policy makers began complaining in early March about the euro’s rise. With inflation at about a quarter of the ECB’s goal, the currency’s almost 6 percent gain against the dollar in the past year is further jeopardizing price stability by cheapening imports and hurting exporters.

The elevated rhetoric, echoed by other ECB officials, was a theme of weekend meetings of the International Monetary Fund and World Bank that global policy makers used to urge European officials to address lackluster inflation before it turns into Japanese-style deflation.

The euro slid against all except two of its 16 major counterparts and was down 0.4 percent at $1.3827 at 1:30 p.m. Frankfurt time. The currency climbed 1.3 percent against the dollar last week.

“More needs to be done to support growth and guard against further disinflation in the euro area,” U.S. Treasury Secretary Jacob J. Lew said on April 11, adding he was “concerned by inflation rates consistently below target and weak demand.”

The strong euro is “a serious preoccupation,” Bank of France Governor Christian Noyer said, adding that the “overshooting of the exchange rate should correct itself.”

Inflation would be about 1 percent without the exchange rate’s advance, twice the 0.5 percent of March that was the weakest in more than four years, he said. The ECB has pledged to return the rate to just under 2 percent.

While the Frankfurt-based central bank doesn’t have a currency target, the exchange rate “impacts on inflation and we have an inflation mandate,” Executive Board member Benoit Coeure told Bloomberg Television on April 11. “So the stronger the euro, the more need for monetary accommodation.”

Policy makers have ratcheted up their warnings that the euro’s appreciation could trigger policy action after Draghi said on March 6 that a climbing currency “might influence our price-stability objective.”

“I’ve always said that the exchange rate is not a policy target, but it’s important for price stability and growth,” Draghi said in Washington. “And now, what has happened over the last few months, it’s become more and more important for price stability.”

The ECB is already considering whether to introduce more stimulus, including possibly quantitative easing. It will probably act to ease monetary policy within two months, according to two-thirds of respondents in a Bloomberg survey.

Echoing Lew, IMF Managing Director Christine Lagarde pressed the ECB to keep policy accommodative and welcomed its attention to low inflation. “We were very encouraged to hear that the ECB has available, and will use in due course and if necessary, the appropriate tools to deal with it,” she said.

Bundesbank President Jens Weidmann, also speaking to reporters in Washington, said the “euro appreciation is partly due to capital inflows, in particular into the euro periphery.”

The gains show “a return of confidence in the euro area,” Weidmann said. The exchange rate “is one of many factors for our inflation assessment and, therefore, we are considering” its effects, he said.

International investors are returning to the region, including to nations that received bailouts in the depths of the crisis. U.S. exchange-traded funds show net inflows of almost $100 million in Greece this year and the country returned to the bond market last week with the sale of 3 billion euros of five- year notes.

While there are signs that the sovereign-debt crisis in the euro area is abating, German Finance Minister Wolfgang Schaeuble warned investors against celebrating prematurely.

“It’s good that markets have become more confident again,” Schaeuble told reporters in Washington on April 12. “But I’ve said that in parts they’re already exaggerating again.”

Weidmann echoed Schaeuble in saying there are concerns that optimistic investors may tempt indebted countries to become complacent.

“There’s a discussion about a stability risk that’s created by financial markets in a certain way running ahead of adjustment processes,” he said.

[Bloomberg]

ekathimerini.com , Monday April 14, 2014 (16:43)  
Workers rush to get early retirement
Piraeus Containter Terminal goes from strength to strength
Moscovici: Creditor inspections to become less frequent and ‘lighter’
Property capital gains tax halt
Environment Ministry to reconsider controversial bill
The government over the weekend appeared to backpedal on proposed amendments widely seen as compromising legislation protecting Greek forests as well as Plaka, Athens’s old quarter. The bill...
Corfu to host country’s first hydroplane strip
Merchant Marine Minister Miltiades Varvitsiotis and Deputy Infrastructure and Transport Minister Michalis Papadopoulos have signed a decision paving the way for the country’s first hydroplan...
Inside News
BASKETBALL
Explosive Barca unfazed by Panathinaikos, bomb scare
Panathinaikos lost 80-67 at home to Barcelona on Friday in a rather meaningless game at the end of the first group stage of the Euroleague, but the encounter will be remembered for the bomb ...
SOCCER
Abidal cuts short playing career at Olympiakos
Former France and Barcelona defender Eric Abidal announced his retirement from football on Friday, a day before his last match. Abidal said he will finish after playing for Olympiakos agains...
Inside Sports
COMMENTARY
The big picture
In his second term, US President Barack Obama is taking steps to enshrine his legacy and solidify America’s standing in the 21st century. His recent decision to normalize relations between t...
EDITORIAL
Get your facts straight
The danger that political discourse in Greece will sink to the basest levels of vulgarity is already more than apparent from the allegations we have heard bandied about over recent days. The...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Environment Ministry to reconsider controversial bill
2. Corfu to host country’s first hydroplane strip
3. Political upheaval sharpens after bribe claims with threats and insinuations
4. Police gets new communications system
5. Most Greeks say they recycle daily
6. Probe into revenues of 2 mln euros in Halkidiki municipality
more news
Today
This Week
1. Get your facts straight
2. The big picture
3. Political upheaval sharpens after bribe claims with threats and insinuations
4. Environment Ministry to reconsider controversial bill
5. Changes on E9 property declarations possible until end-year
6. Police gets new communications system
Today
This Week
1. Samaras summons bond vigilantes with euro exit talk
2. A friendly yet firm message from Pierre Moscovici
3. Europe's drama in Greece needs final act to avoid tragedy
4. High stakes
5. On the edge but not gutless
6. Gap between SYRIZA and New Democracy closing, says poll
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.