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Despite Earlier Economic Crises, Euro Performing Well — Almost Too Well

It was only last spring, amid the Greek financial crisis and divisions among European Union nations on how to respond to it, that some voices of alarm arose about the future of the European common currency, the euro, and even of the entire EU enterprise.

euro.jpgBut on the eve of the annual IMF-World Bank meetings in Washington, one of Europe’s top financial officials assured all who would listen that the euro is doing just fine, thank you. Almost too well. The currency is trading at close to 1.40 against the U.S. dollar. In the midst of the Greek crisis, which some feared would spread quickly to Ireland, Spain and Portugal and possibly bring the exit of one or several from the common currency, the Euro sunk to 1.19.

“I am not happy with it,” said Jean-Claude Juncker of the Euro’s high trading rate, which could hamper European exports and efforts to pump up an anemic recovery. Juncker is president of the Eurogroup (the finance ministers of the 16 continental countries that use the Euro) and Luxembourg’s long-time prime minister. He spoke Friday morning at a European Institute breakfast meeting.

A massive European and IMF rescue package, in return for promised reforms by Athens, staved off a complete catastrophe last spring. Juncker insisted the EU acted with reasonable dispatch then, despite some criticism from Washington and elsewhere. “We resolved our differences faster than the White House and Congress can act,” he added.

Junker insisted the latest alarms about Ireland’s banks are different from the Greek crisis and that the Irish government is taking measures to keep the “situation under control.”

Like most financial officials in Washington for the meetings, Juncker is also focusing on concerns over China’s artificially low valued currency, the renminbi, and its effect on international trade. But he asserted the Europeans are taking a different approach than the Obama administration with the Chinese. “We have been consulting with them, not lecturing them,” he said in response to a question whether the Europeans were letting the Americans “do the dirty work” in confronting Beijing on the currency issue.

On a more philosophical note, Juncker (who is the longest serving head of government in Europe) expressed concern that a new group of European leaders with inevitably “different autobiographies” is not imbued with the feeling that the essential purpose of the EU is to prevent a repetition of the horrors of the 20th century. Current European leaders need to listen better and get a deeper understanding of each other’s countries and problems, he said.

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