So far it’s been a busy morning for the Eurozone.
After Luxembourg Prime Minister Jean-Claude Juncker expressed concerns yesterday that the Euro was trading at ‘dangerously high’ levels (levels which would be detrimental to the currency bloc’s trade and growth) the Euro fell back from its ten month high against the US Dollar and posted declines against several of its other most traded peers.
Meanwhile Mariano Rajoy, the Spanish Prime Minister, was also in the spotlight as the Financial Times published a recent interview with him this morning.
In the interview Rajoy, head of one the Eurozone nations which has struggled most over the past year, asserted that other leaders within the 17 nation currency bloc needed to do more to boost growth. He argued that those countries performing the best, like Germany, should push through policies which would benefit the whole region.
Rajoy was quoted as saying: ‘I think that in this moment, when there is need for growth, those who are able to implement growth policies should do it. What is clear is that you cannot ask Spain to adopt expansionary policies at this time. But those countries that can, should.’
He also made brief comment on Spain’s controversial reluctance to seek help from the European Central Bank. ‘People might say that I wasn’t right by not entering the outright monetary transactions programme. I am not really bothered by that […] We took a decision that was right for Spain […] But in the year since I took over the government I reduced the public deficit in a situation where we were in recession. I pushed through structural reforms and a reform of the banking sector.’
Rajoy’s comments may not go down too well in Germany, where many feel that their own present difficulties (the German economy contracted by more than forecast in the 4Q of 2012) are the result of Germany having to bail out its underperforming neighbours.
Also of interest today are developments in Ireland. Despite having its back right up against the wall three years ago it seems the Emerald Isle really has managed to turn things around. The Irish Prime Minister, Enda Kenny, has today informed the European Parliament that his nation will exit its bailout before the close of this year.
By mid-morning Eurozone CPI figures had been released and showed that in December inflation held steady, unaltered from November’s 2.2 per cent. An economist with Global Insight expressed his belief that as a result the ECB may well initiate another rates cut in the near future.
He said: ‘There is nothing alarming in the December Eurozone inflation data and underlying inflationary pressures seemingly remain muted amid extended weakened economic activity and high and rising unemployment. Consequently, it still seems likely that Eurozone consumer price inflation will move below 2.0% over the coming months. This will help consumers’ purchasing power and gives the ECB scope to cut interest rates.’
This data was followed by the German Economy Minister’s growth forecast. With trade suffering and growth slowing the German government has slashed its growth forecast for the nation. Originally the economy ministry forecast that German GDP would grow by 1 per cent this year. In light of recent data they have now cut that to less than half, predicting expansion of just 0.4 per cent.
This follows the World Bank’s outlook cuts announced earlier today.
It wasn’t all gloom though, the German government still maintain that the largest economy in the Eurozone will experience a rebound of growth in 2014 of 1.6 per cent.
The German economy minister asserted: ‘We assume that the phrase of weakness this winter will be overcome in the course of the year and that our economy will gain traction again’.
And there’s no rest for the Eurozone tomorrow as the ECB publishes its monthly report.
As of 11:45 am
The Pound to Euro exchange rate is currently trading at 1.2042
The Pound to US Dollar exchange rate is currently trading at 1.6042
The Pound to Australian Dollar exchange rate is currently trading at 1.5197
The Euro to US Dollar exchange rate is currently trading at 1.3318
The Euro to Pound exchange rate is currently trading at 0.8301
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