Euro doubts labeled ‘absurd’
The Bank of Greece’s governor, Nicholas Garganas, dismissed doubts about the future of the eurozone yesterday as the euro dipped on continued weakness in the currency to lows not seen in the last 10 months. Garganas, who is also a European Central Bank (ECB) Governing Council member, said that he shares the view of others on the governing council that speculation over the future of the euro is «absurd.» The euro dipped below 1.20 dollars yesterday for the first time since August 2004, under the weight of expectations for an interest rate cut. It later recovered to recapture the support level in late trade in New York. Confidence in the euro has been dented recently due to a lack of confidence in the eurozone’s economy. A member of Italy’s coalition government recently called for a referendum on whether the country should go back to the lira. Italian Prime Minister Silvio Berlusconi has ruled out the idea. Garganas, however, did admit that the ECB’s monetary policy is not enough to boost growth across the single-currency zone. «Price stability and low interest rates… provide the fabric upon which a more dynamic Europe can be woven,» he said. «Recent events only confirm that a currency union requires greater competition.» Garganas also acknowledged that there are inflation differentials among eurozone members but said that factors contributing to these differentials include misaligned fiscal policies, wage dynamics not linked to productivity and other structural inefficiencies. Greece is a country that falls under this category. Structural inefficiencies are among the key factors seen feeding inflationary pressure in the economy.