EU Commission sees higher euro boosting H2 demand, growth
The higher euro's impact in reducing inflation and boosting domestic demand will stimulate growth in the second half of the year, commission monetary affairs spokesman Gerassimos Thomas said.
He was commenting on the euro's return to parity with the dollar yesterday, and added: "The strong euro is in the interests of the euro zone."
He said it has a positive impact on the terms of trade and on inflation, but he declined to be drawn on the ramifications for the European Central Bank's interest rate policy, saying that is up to the ECB.
Though the euro has risen sharply and suddenly against the dollar, its impact is better judged by looking at its strength versus the range of currencies, where, overall, its rise has been of 4-5% in real terms, he said.
He reiterated the euro group's official position that the strength of the euro is a "welcome development," as the currency has "long been undervalued."
However, it also means that the euro zone "has to pay more attention to structural reform to underpin the competitiveness of the economy," Thomas said.
While the rise has a range of effects, he said exports have been "holding up relatively well" against the currency's advance and "on balance the effects are on the positive side".
The improvements in the terms of trade will help stimulate both domestic demand and growth, he said.
Whereas European growth was export-led in the first half, it will be domestic demand-driven in the second half, he said.
"In the recovery in the first half year, we depended more on exports, but in the second half, we will depend more on internal consumption," he said.
He added the overall impact will have to be seen over the medium term, as short-term volatility, such as the euro's climb versus the dollar, "cannot always be explained in macro-economic terms."
