ECONOMY

Euro gives stability in turmoil

The euro currency has proven itself to be a source of stability and confidence amidst the ongoing economic turmoil, protecting member states from turbulence, said Bank of Greece governor Giorgos Provopoulos in an article published in Sunday’s Kathimerini. «Without it, the countries that adopted the euro would have been exposed to serious turbulence, such as that experienced in 1992 and 1993,» Provopoulos wrote in the article. «It is no coincidence that other EU countries are now thinking of joining the eurozone,» added Provopoulos, who is also a member of the European Central Bank (ECB) governing council. Member countries must, however, adhere to the guidelines of the European Commission’s Stability and Growth Pact for it to remain successful, he added. In cases such as Greece, however, where there is high public debt and a large current account deficit, relaxing fiscal responsibility would have a reverse effect in the medium term. «Such a relaxation would worsen fiscal credibility, increase the cost of servicing the debt and aggravate current account problems,» he said. Greece’s public debt is the second highest in the eurozone after Italy, while its budget deficit in 2007 breached the EU’s 3 percent threshold. Extending the euro to new member states is a challenge for the ECB and the common currency, while there are three main challenges for central banks worldwide: globalization, technological progress and aging populations, said the central banker. «It is important to overhaul the global system and strengthen it with regulations.»