BoG supports strong euro

The governor of the Bank of Greece yesterday defended the strong euro, saying that it reflected its fundamental value and an opportunity for countries in the eurozone to institute structural reforms to strengthen their competitiveness. The euro has risen by more than 20 percent against the US dollar over the past year. Last month, it hit an all-time high of more than 1.19 dollars. The European Central Bank has welcomed the rapid appreciation of the euro, seeing it as one way to tame inflationary pressures. The International Monetary Fund earlier this month voiced support for the strong euro but warned of the risks of the currency overshooting its appropriate level. Businesses said the strong euro is hurting their export earnings, sentiments reflected in the eurozone’s first-quarter GDP figures which showed a fall in exports. The Organization for Economic Cooperation and Development has warned that a 10-percent rise in the trade-weighted euro could shave more than 75 basis points off euro area GDP growth within a year and bring inflation down by as much as one percentage point within two years. «The current euro-dollar exchange rate better reflects the eurozone’s fundamental economics than in the past,» said Nikolaos Garganas, BoG governor. Instead of looking at the strong euro as a drag on competitiveness, he said the rapid rise in the strength of the currency should serve as a trigger for structural reforms to reinforce the euro area’s competitiveness, boost investments and create jobs. He said Greece should accelerate structural reforms to achieve real convergence and to offset the lower inflow of EU funds in the future.

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