News / Economy

EU Commission Predicts Euro Will Get Even Stronger

FILE-  euro currency in the regional central bank in Bremen, Germany.
FILE- euro currency in the regional central bank in Bremen, Germany.
The euro will appreciate at a record pace this year and continue to gain in value in 2014, the European Commission predicted, a spiral that could hamper the currency bloc's export-driven recovery.
A stronger euro, which despite a recent slide is still up nearly six percent against the U.S. dollar in the last four months, makes the euro zone's exports more expensive and could dampen the bloc's recovery from its long recession.
On Tuesday, the Commission cautioned that it saw the 18-nation single currency making further gains.
It forecast a rise of 5.8 percent against a dollar-denominated group of countries this year and another 0.9 percent increase next year.
Such a rise would outstrip the jump in the euro's value in 2009, before the bloc's sovereign debt crisis caused the currency's value to plummet.
Italy's finance minister called on the European Central Bank to cut interest rates to a new record low to try to reverse the euro's rise, while several large French companies have warned the euro's strength is affecting their earnings.
Asked about whether the ECB should consider a rate cut, the EU's top economic official declined to comment directly.
“The ECB stands ready to act ... I don't want to cross the ECB's independence by stating the obvious,” EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference.
The ECB's main interest rate is already at a record low 0.5 percent and a majority of traders polled by Reuters on Monday expect the central bank to keep it unchanged at a policy meeting on Thursday.
However, ECB President Mario Draghi is expected to signal a readiness to ease policy further after euro zone inflation fell to 0.7 percent in October, its lowest level in almost four years and well below the bank's target of just below 2 percent.
Longer-term risks
At a time of record unemployment, strong exports in southern Europe, particularly in Spain, are the engine of recovery.
In its latest forecasts, the Commission curtailed its expectations for growth next year to 1.1 percent from an earlier prediction of 1.2, although it made no mention of the euro's value and said it expected exports to continue to grow despite a stronger currency.
But economists warn that a persistently high exchange rate is a threat to the bloc's long-term growth potential.
Factories in France, the euro zone's second-largest economy, are seen as one of the most affected areas because high labor costs and lower productivity mean they have less room to withstand the pressure that comes from more expensive exports.
That contrasts with Germany, Europe's biggest exporter, that has so far remained silent about the strength of the euro because German manufacturers have more ability to raise productivity and quality and cut costs.
“When productivity or the quality of products cannot be raised to offset the competitive pressure created by currency over-valuation ... profit margins cannot but fall,” said Gilles Moec at Deutsche Bank.
“We see this already at play in France,” he said.

You May Like

Video Egyptian Journalists Call for Press Freedom

Despite release of al-Jazeera journalists and others, Egyptian Journalist Syndicate says some remain imprisoned More

Turkey Survey Indicates Traditional Distrusts, Shift to the West

Comprehensive public opinion survey also found a large majority of those interviewed distrust all countries other than country’s neighbor, Azerbaijan More

Pakistan Court Upholds Death Sentence in Blasphemy Killing

Highest court upholds sentence of Mumtaz Qadri convicted of 2011 killing a provincial governor for criticizing country’s controversial blasphemy law More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Making a Minti
October 07, 2015 4:17 AM
While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video Self-Driving Cars Getting Closer

We are at the dawn of the robotic car age and should start getting used to seeing self-driving cars, at least on highways. Car and truck manufacturers are now running a tight race to see who will be the first to hit the street, while some taxicab companies are already planning to upgrade their fleets. VOA’s George Putic has more.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Clinton Seeks to Boost Image Before Upcoming Debate

The five announced Democratic party presidential contenders meet in their first debate next Tuesday in Las Vegas, Nevada. Former secretary of state Hillary Clinton continues to lead the Democratic field, but she is getting a stronger-than-expected challenge from Vermont Senator Bernie Sanders. VOA National correspondent Jim Malone has more from Washington.

Video Music Brings Generations Together

When musicians over the age of 50 headline a rock concert, you expect to see baby boomer fans in the audience. Boomer rock stars have boomer fans. Millennial rock stars have millennial fans. But this isn’t always the case. Take the Lockn’ Music festival which took place in mid-September in rural Arrington, Virginia. Here, Jacquelyn de Phillips discovered two generations of people who are considered quite different in the outside world, spending 4 days together in music-loving harmony.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

Video South Carolina Reels Under Worst-ever Flooding

South Carolina is reeling from the worst flooding in recorded history that forced residents from their homes and left thousands without drinking water and electricity. Parts of the state, including the capital, Columbia, received about 60 centimeters of rain in just a couple of days. Authorities warn that the end of rain does not mean the end of danger, as it will take days for the water to recede. Zlatica Hoke reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

VOA Blogs

World Currencies


Rates may not be current.