Yes, that was a surprise to me, too, but it taught me a lesson. Even when you say something very innocent, and it was, it may have an unintended impact.
Current indications are that we will have growth rates in the euro area this year, next year and probably the year after of slightly in excess of 3 percent. Earlier we thought it would be stronger, but the long-lasting high level of oil prices dampened expectations.
No. It has 11 governments behind it… One should not underestimate the effort made to coordinate on a daily basis.
We do our best to speak with one voice about the euro, not always with success. But as one of my colleagues in the U.S. Federal Reserve System once said to me, “Don’t forget that it took us two years in the first Clinton administration to speak with one voice about the dollar.”
There are increasingly signs of a slowdown, not a recession, but a slowdown of American growth rates. So the growth gap seems to be closing. And that is also one fundamental reason why we believe that the euro has a strong potential to appreciate. We think markets have overshot. The euro is clearly undervalued at the moment.
The exchange rate of the euro is a problem if it has a lasting effect on the rate of European inflation. The other problem is a more psychological one. The continuous beating on the euro may undermine the confidence people have in their currency. The simple fact that the U.S. is running a current-account deficit of around $400 billion a year, thereby using the savings of the rest of the world, is not sustainable in the long term. That will be, and has to be, corrected.
Oh, he knows it.
If you notice some change in tone here, then I think you are right. Many things still have to be done. But many have been changed already. So I’m now more inclined to emphasize a little to the world: Europe is on the move. But we have to keep moving.
I continuously fight that misconception. The euro is already there. It’s only the bank notes and coins that have to be introduced. People get concerned that the value of their income is being undermined, but that is not true. The way to measure the strength of your currency in your pocket is to look at inflation. I’ve actually replied to letters from people who are concerned about the value of their savings. These people never spent a day in their lives more than 10 miles from the village they were born in.
The mark would have been “as weak” vis-a-vis the dollar, and one thing is different in this new world. In the past, when there was an external shock, like a surge in oil prices, it would have created havoc in European exchange markets. Exchange rates in Europe don’t exist any longer. They are irrevocably fixed.
People will understand and appreciate that much better once they have the bank notes and coins in their pockets.
When you ask someone in Middletown, America, “What’s the dollar doing today?,” you will get the answer, “Why? The dollar is the dollar.” People still have to learn in Middletown, Europe, that a euro is a euro.
I wouldn’t do that, but I would say that I would continue to do what I have been doing. I’m a sailor; I would use the phrase “steady as she goes.”
Fun is not the word. It’s fascinating to be part of a process that has no precedent in history.
