Corrigan quotes from recent Q&A with Duisenberg:
>>There, amid Duisenberg’s obligatory finger-wagging at German wage negotiators and broad hints that their actions could have consequences for interest rates, something else much more significant was announced: the Strong Euro policy.
Consider the following blunt assertion in the Q&A session:-
‘The main risk I have in mind is the huge and growing current account deficit ofover 4% of GDP in the United States which, I am inclined to say, is a risk to the world economy. I am not, however, going to speculate about what would happen should this situation develop further. I hope it can be contained in due course because, over time, I regard it as unsustainable.’
This was followed by unusually unequivocal statements lauding the Euro’s recent strength:
‘We have had some disappointments, may I say, but one factor that could help to attain this goal, of course, once it works its way through, is the effect of the recent strengthening of the euro, provided that it continues.’
‘A continuing appreciation, or even a continuation at the current level, will help us at least in keeping inflation under control. And that is a good thing. And I do not believe that it will have, as far as it has gone now, any impact on the real economy developments, on output and export capabilities. As to your first question on whether the current solidity of the euro marks a change in market sentiment, well, I hope it does.’
Effectively, Duisenberg is telling Big Al that he’ll be on his own the next time he wants to pump liquidity into the stock market (or housing) and it may be that – now the Euro has been given a physical presence – the Europeans feel the time has come to challenge the mechanism of Dollar Imperialism.
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