French finance minister Michel Sapin said the European Central Bank has been "fast and efficient" with policies that have helped weaken the euro and now need reinforcing measures from governments.
“It really has the right policy,” Sapin said in an interview in Washington yesterday. “It’s had an effect on the value of our currency; now the liquidity provided needs to feed into our economies, and that can only happen progressively.”
The euro dropped from a 2½-year high in May as officials unveiled stimulus measures, and consolidated below $1.30 when ECB president Mario Draghi cut rates and signalled a desire to grow the ECB’s balance sheet. The region has re-emerged as the main concern of officials worldwide after its economy stalled in the second quarter and inflation slowed to the weakest in almost five years.
Draghi at a press briefing yesterday denied the ECB is purposefully trying to weaken the euro, saying it has no target for the currency’s value and that its recent decline reflects international differences in monetary policy.
The ECB “said it was ready to take all necessary measures,” Sapin told reporters yesterday. Monetary policy “is not what worries me anymore.”
Sapin said the region’s 18 countries need to play their part by adjusting the pace of reductions of budget deficits and making in-depth changes to their economies.
“Some countries have room for manoeuvre, they must use them, in terms of budget stimulus,” Sapin said in the interview. “Others, France included, must continue to narrow their deficits, but at a pace that’s suited for the search of stronger growth.”
France announced last month that its budget deficit will widen this year for the first time in half a decade, breaking commitments made to its European partners in April.
Dutch finance minister Jeroen Dijsselbloem, who leads the euro-area finance ministers’ group, said France needs to act on budget measures as “they are too far off target” and actions so far appear “simply not good enough.”
Asked in the interview about Greece’s intention to sever the international lifeline that has kept it afloat since 2010, Sapin said the country needs to make sure its exit from loans provided by the European Union and International Monetary Fund is secure.
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