ECONOMICS | THE EURO AND THE DOLLAR
FROM STRENGTH TO STRENGTH Will the strong euro strangle Europe’s economic recovery asks Katinka Barysch.
30 • the Parliament magazine
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very year since 2000, economists have predicted a recovery in the eurozone. Every year, they have been disappointed. Will 2004 be any different? Although many economic indicators hint at an economic upturn, eurozone watchers are worried. The reason: the strong euro. Against the dollar, the euro has risen by close to 50% since its low point in July 2001. In mid-February, it traded close to its all-time high of $1.29. Jean-Claude Trichet, the ECB’s president, has called the currency’s rapid ascent “brutal”. In its latest monthly bulletin,
the ECB talks about “excessive exchange rate moves”. Governments in Germany and elsewhere have warned that the strong currency could strangle Europe’s nascent recovery once more. Recent data seem to confirm such fears. Eurostat reckons that the eurozone economy grew by a paltry 0.3% in the last quarter of 2003, compared with the previous three months. While exports were the main driver of eurozone growth in 2001-2003, they have now turned into a drag on growth. European companies are feeling the pain, especially
February 23rd 2004