Sinking euro is good for exports, says EU
25 June 2010
The euro's decline in recent months may boost exports from the currency area by 5 per cent, though the longer-term impact on economic growth is ''less certain,'' the European Union said on Thursday.
''The trade recovery is now gathering momentum on the back of strong import demand in emerging markets,'' the European Commission, the EU executive, said in its quarterly assessment of the euro-region economy. ''Euro-area exports will be further stimulated by the recent depreciation of the euro.''
Europe's rebound from the worst slump in six decades has become reliant on exports as rising unemployment prompts consumers to cut back spending. While a Greek debt crisis prompted governments across the region to curtail spending to tackle swelling deficits, it also has pushed down the euro, making euro-area goods more competitive abroad.
The 16-nation currency's ''real effective exchange rate has lost close to 10 percent'' since its peak in October, the Brussels-based commission said. Against the US dollar, the euro has fallen 19 per cent since its Nov. 25 high, trading today at $1.2279 after reaching a four-year low of $1.1877 on 7 June.
''The depreciation, if it persists, could boost exports by about 5 per cent, with much of the gains taking place already in 2010,'' according to the report.
A 2.5 per cent increase in euro-area exports in the first quarter countered a 0.1 percent drop in household spending and helped the economy maintain its recovery. Gross domestic product rose 0.2 per cent in the January-March period, accelerating from 0.1 per cent growth in the fourth quarter.