Wednesday, May 25, 2005

More on €uro rates & the €uro being at risk.

Further to the comments of the OECD and the ECB being diametrically opposed as per the previous post. The FT notes today that

..... Mr Liikanen indicated that the ECB still expected its next interest rate move to be upwards. “We have a very accommodative policy stance at the moment,” he said. “There is a monetary stimulus in the market place. At some point in the future, policy should move towards a more neutral position.” Quote from Eurozone weakness “baffling”
Also well worth reading is today’s editorial False Stability It concludes by posing some questions on the ECB -
has it over-interpreted its price stability target? Is it chasing an arbitrary goal? Why is it so obsessed with government deficits? Why does it place so little emphasis on its other treaty obligation of supporting the European Union's economic policy? These are questions Europeans have not been, but should be, asking.
Perhaps Europeans might decide to go one stage and question the stability of the foundations of European Monetary Union(EMU) - Professor Martin Wolf writing in the FT certainly does:
Let us think the unthinkable: could the eurozone disintegrate? The answer is yes. Disappearance of the zone as a whole seems hugely unlikely, so long as the commitment to the European project survives. But the exit of one (or more) members, a sovereign default or both is not at all inconceivable.

See -
Italy’s predicament exposes Eurozone
There are some serious risks inherent in EMU as it currently exists in the Eurozone......