Eurozone NEW RISK: Exports TUMBLE as strong Euro drives up prices in fresh hell for ECB

Monday, August 14, 2017
By Paul Martin

THE eurozone’s economy is under threat, as exports and inflation sink amid a stronger euro, piling fresh pressure on monetary policymakers in the bloc.

By LANA CLEMENTS
Express.co.uk
Mon, Aug 14, 2017

The bloc’s powerhouse Germany saw overseas demand for its goods sink in June.

And it is feared exports could take a bigger hit in the coming months after the euro recently hit its highest level against the US dollar in around two and half years.

In a stark warning, Ilja Nothnagel, trade expert at DIHK, the confederation of German industry and commerce told the Financial Times: “Our exports are becoming more expensive and the demands on our [companies’] competitiveness are increasing.”

The stronger euro is also set to push down inflation in the eurozone, with the key economy measure already under-performing.

Worries are growing for how the European Central Bank (ECB) is now going to wind down its mammoth money-printing programme, which has helped the bloc’s recovery.

The so-called Quantitative Easing programme pumps billions of euros into the bloc each month through bond buying.

But the ECB balance sheet is now above four trillion euros and it is feared the bank could soon run out of assets to buy, meaning the programme must soon be scaled back.

When inflation remains high and the recovery is threatened, chief central banker Mario Draghi will find it difficult to reduce the programme.

The stronger euro is now another stumbling block, as it could climb higher if the ECB announce money-printing is reducing.

But the current programme is due to end in December and policymakers must make a decision soon.

Markets had expected Mr Draghi to update in September but analysts said the ECB chief may now put off difficult decisions until October.

Frederik Ducrozet, economist at Pictet Asset Management, said: “The appreciation of the currency is only adding to the ECB’s communications difficulties.”

The Rest…HERE

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