Tag Archives: ECB

Onwards And Upwards We Go

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It’s no secret that the euro is now hitting record highs in its exchange rate with the dollar. It is also pretty apparent that some EU leaders are becoming rather preoccupied about the consequences of this for those eurozone economies which are driven by exports. What is much less clear though is what can be done about it.

The dollar early today was trading at $1.3065 per euro in Tokyo, signalling that the $1.30 psychological threshold may now lie behind us. Some experts are suggesting that the ECB would be reluctant to see the euro rise above $1.35, but since what is happening is more a dollar slide story than a euro rise one it is hard to see what they can effectively do about the situation.
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Economic Consequences of Spain’s 11M

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Italian consumer confidence has remained near a 10-year low in March in the wake of the Madrid terrorist bombings. In fact the bombings may have hurt sentiment in Italy more than the Sept. 11 attacks on the U.S. according to a statement from the government-funded Isae institute. The confidence survey, which was carried out between March 1 and March 12, showed that consumers who had been growing more optimistic about the prospects for lower inflation and improvements in unemployment turned pessimistic in the two days after the bombings. In fact while the 22-year-old Italian consumer confidence index touched its all time record low of 93.7 in April 1993, March was the third month in a row that the index has been below 102, the last time it was that low being in February 1994.
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Rodrigo Rato: Wagging The Finger, Or Wagging The Dog?

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I have already posted on my own blog about what I see as the surreal consequences which might follow from this wish becoming a reality. If what I think happens next to the Spanish economy really does happen – and I have no doubt whatsoever that the housing bubble will crash one or other of these days – then the situation will be a bit like having Menem at the head of an IMFwhich is telling Argentina that they should have thought about the consequences before getting into all that trouble……..

My interest here today, however, is more the European dimension of this process. Firstly, if it is true, as the FT seems to contend, that the European candidature will carry the field, what does this tell us about the IMF? Secondly, maybe focussing on the IMF managing directorship is to miss the point. Maybe the real horse-trading is over future control at the ECB. In other words: will this be a case of wagging the finger, or wagging the dog?
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