The member of the ECB governing council Ewald Nowotny declared at the Euromoney press conference in Austria on Wednesday that the Eurozone is bound to contract in 2013 and that growth would return in 2014.
Nowotny warned that economic activity would decrease this year, adding however that this trend should start reverting in the third semester of the year. Nevertheless, he suggested that growth would not come back until the beginning of 2014.
Nowotny also commented that the euro exchange rate is "not a matter of major concern," responding to Luxembourg Prime Minister Jean Claude-Juncker's earlier concerns over the excessive strength of the currency. He assured that EU banks depend less and less on the central bank's funding.
“I am quite sure that the panic situation, if there ever had been one, is over,” he assured. His comments caused the EUR/USD to rally back over 1.3300, while the EUR/JPY hit 117.37.
Juncker: Euro’s value ‘dangerously high’, posing economic threat
After a year of upheaval across peripheral Europe in 2012, the single currency managed to notch a steadfast gain against its American counterpart during the latter months. Quantifying this advance into the frame of the previous six months however, the EUR has climbed a sizable +8.0% against the USD – posing a fresh threat to the European economy just as many had assumed it was in escape velocity from its debt crisis.
At the forefront of the group of euro-finance ministers stands Jean-Claude Juncker, who recent echoed policy makers from across the financial world in reiterating the validity of the strong exchange rates, labeling the euro’s value as “dangerously high” after the 17-nation currency bloc traded above the $1.3400 mark this week for the first time since February 2012.
In past months, the euro has rallied amidst growing signs of fortitude amongst the financial markets that point to mitigation of the three-year debt turmoil. However, as recently as last week, European Central Bank President Mario Draghi signaled no immediate plan to ease monetary policy further.
“It was said last year that the euro zone was at risk of breaking and I said last year that this won’t happen,” stated Juncker, who steps down this month as head of the so-called eurogroup, at an annual gathering of business leaders in Luxembourg. “The euro zone has become more stable after lots of efforts, some from me,” Juncker added, warning that the “the euro foreign-exchange rate is dangerously high.”
After the release of economic data out of the EMU earlier this morning, the EUR/USD was trading above the 1.3300 handle during European trading Wednesday.