EU Concerned Over Euro Rise, Keeps 2008 Growth View
The European Commission expressed concern on Wednesday about the euro's rise, saying it added to the strengthening headwinds facing euro zone growth, but stuck to its 1.8 percent forecast for 2008 economic growth.
In a quarterly report on the economy of the 15 countries using the euro, the Commission noted rising uncertainty about how long turmoil on financial markets would last, how much it would cost and which institutions would be hit the most.
The turmoil has affected investor confidence and the cost of credit, hampering growth. Euro zone growth would also slow this year because the U.S. economy was already in or on the brink of recession, according to economists.
"In the case of the euro area, the impact of the U.S. downturn will also depend on developments in exchange rates," the European Union's executive arm said in the report.
"In this respect, excessive volatility and disorderly movements in exchange rates are undesirable for economic growth and, in the present circumstances, excessive exchange rate moves are a source of concern," it said.
The remarks are similar to the statement from euro zone finance ministers and the European Central Bank, meeting in an informal forum called the Eurogroup, from early March.
The euro hit all-time highs at just above $1.59 on March 17. It has since fallen back, but is on the rise again.
The report said record-high inflation, which in February hit 3.3 percent in annual terms, was another downside risk to euro zone growth.