OECD: Euro Dip Welcome, Won't Spark Euro Zone Recession

Wednesday, 26 May 2010 07:35 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
A return to recession is unlikely in the euro zone and a drop in the value of the euro should help offset the toll that debt-shrinking austerity measures takes on economic growth, the OECD's chief economist said.

Pier Carlo Padoan argued in an interview with Reuters that governments need to pursue fiscal consolidation, combine that with growth-increasing reforms of pension systems, labor and other markets, and show they are working in unison to convince skeptical financial markets that their strategy is credible.

The OECD authorized the release of this Reuters interview, originally programmed for 0845 GMT release on Wednesday, after French newspaper Le Figaro published comments from Padoan earlier on Wednesday, on condition that it not include OECD macroeconomic forecasts, also due for release at 0845 GMT.

Padoan told Reuters that even if austerity hit growth in the euro zone, it would be partly offset by Asian-led demand for euro zone exports, made more competitive by the drop in the euro's exchange rate, he said.

The euro exchange rate versus the dollar has fallen by about 14 percent this year, while its trade-weighted value has slipped more than 10 percent, according to a measure the European Central Bank watches closely.

"Is there going to be a double-dip (recession) in Europe? I don't think so," said Padoan, who said massive debts following the 2007-09 global recession were "not just a European story", but one that Europe was about to tackle faster than others.

Euro zone exporters stood to do well from rising foreign demand, helped by a weaker euro exchange rate, Padoan said.

"If you combine the two -- high growth in Asia and a weaker euro – that could add quite a boost to European exports," said Padoan. "The weak euro, in the short- to medium-term, is a welcome development.

"In any case it would be good for the global economy if ... nominal exchange rates changed a little bit. The euro certainly has been overvalued for some time and the renminbi has certainly been undervalued for some time."

© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved