Stronger euro holds no threat to euro zone growth: Bundesbank

Bundesbank head Jens Weidmann said Europe’s policymakers must monitor currency developments closely as they seek to reduce inflation in the euro zone. (Reuters)
Updated 08 February 2018
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Stronger euro holds no threat to euro zone growth: Bundesbank

FRANKFURT: The increasing strength of the euro against other currencies such as the dollar does not threaten to slow mounting growth in the euro area, Germany’s central bank chief said.
“The recent appreciation in the euro seems unlikely to jeopardize the expansion,” Bundesbank head Jens Weidmann said in a speech.
“It is, at least in part, rather a reaction to the brighter growth prospects of the euro area,” he said.
Weidmann’s response to the stronger single currency is more relaxed than the common position of the European Central Bank, where he sits on the governing council.
“Downside risks” to growth in the euro zone “relate primarily to global factors, including developments in foreign exchange markets,” ECB President Mario Draghi said last month.
Since mid-December, the euro has gained around 4 percent against the dollar and 1 percent against the yen.
Looking back further over the past year, the single currency’s gains amount to 15 percent against the greenback and 10 percent against the Japanese unit.
As in the ECB’s common position, Weidmann acknowledges that policymakers must “monitor closely” developments on currency markets for their potential impact on the central bank’s efforts to push inflation toward just under 2 percent.
A stronger euro directly saps inflation by making imports cheaper.
By also making euro area products more expensive abroad it can indirectly slow price growth by limiting economic expansion.
But “recent research suggests the impact of exchange rate movements on inflation has declined,” Weidmann noted.
The Bundesbank chief also took the opportunity to burnish his credentials as a so-called “hawk” in favor of reducing ECB support to the economy — in the shape of mass bond purchases and low interest rates — as it strengthens.
Frankfurt policymakers have waved through more than €2.3 trillion ($2.8 trillion) of government and corporate bond purchases since March 2015, with the program currently slated to end in September once it hits around €2.5 trillion.
“If the expansion progresses as currently expected, substantial net purchases beyond the announced amount do not seem to be required,” Weidmann said.
In a question-and-answer session on Twitter, ECB chief economist Peter Praet downplayed differences on the governing council about the bond-buying scheme, saying members agree on their objectives and “discussions are more on tactics.”


Erdogan hints Turkey may ban some Israeli goods because of Gaza violence

Updated 22 May 2018
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Erdogan hints Turkey may ban some Israeli goods because of Gaza violence

  • Erdogan is campaigning for re-election in June
  • Comments follow deaths in Gaza

President Tayyip Erdogan has hinted that Turkey might consider imposing a ban on imports of some Israeli goods over the killing of Palestinian protesters by Israeli forces on the Gaza border, media reported on Tuesday.

Erdogan, who is campaigning for re-election in June, last week hosted Muslim leaders who condemned the events in Gaza and the opening of the United States embassy in Jerusalem.

Speaking to reporters on a return flight from Bosnia on Sunday, Erdogan said the 57-member Organization of Islamic Cooperation (OIC) had recommended that a boycott be imposed on Israeli goods.

“I hope that OIC member countries implement a boycott decision in line with the recommendation. Consequently, no product should be brought from there any more. Naturally we will assess this situation in the same way,” Hurriyet newspaper reported Erdogan as saying.

A declaration by the OIC on Friday repeated a call for countries to ban “products of the illegal Israeli settlements from entering their markets,” referring to goods produced in the Israeli-occupied West Bank and Golan Heights.

It did not seek a ban on all Israeli goods.

The declaration also called for “economic restrictions (on) countries, officials, parliaments, companies or individuals” who followed the United States and moved their embassies to Jerusalem.

US President Donald Trump’s move to recognize Jerusalem as Israel’s capital and shift the US embassy there reversed decades of US policy, upsetting the Arab world and Western allies.

Erdogan said last week that Trump’s move had emboldened Israel to put down the protests at the border with Gaza with excessive force, likening the actions of Israeli forces to Nazi Germany’s treatment of Jews in World War Two, when millions were killed in concentration camps.

The violence in Gaza, where more than 60 Palestinians were killed on May 14 led to Turkey and Israel expelling each other’s senior diplomats. Erdogan also traded barbs on Twitter with Israeli Prime Minister Benjamin Netanyahu.

Israel was the 10th-largest market for Turkish exports in 2017, buying some $3.4 billion of goods, according to IMF statistics.

Data from Turkey’s statistics institute showed that trade volume between the two was at $4.9 billion in 2017. Turkey, which has a trade surplus with Israel, imports plastics and mineral oils among other goods from there.

Erdogan said Turkey would reconsider its ties with Israel.

“We will put our relations on the table, in particular our economic and trade relations. We have an election ahead of us. After the election we will take our steps in this direction,” Erdogan was quoted as saying.