European Central Bank Chairman, Jean-Claude Trichet gave a speech at the London School of Economics this Monday, giving some positive comments on the Euro, helping the currency lift higher.
Trichet explained that the each EU member state’s economic strength should be seen separately much like in the United States of America. He claimed that the divergences between the economies of individual member states of the euro zone are no greater than those between states in the U.S.
“Those who question the viability of the Euro area as a single currency area on the grounds of economic heterogeneity are misguided,” Mr. Trichet said in a lecture to the London School of Economics, citing a number of academic studies arguing that the degree of variance is no greater than in the US.
The ECB Chief was speaking in defense of the Euro hoping to ease markets concerns which are growing recently due to the peripheral economies such as Greece and Portugal and Ireland being unable to grow as fast as other EU member states, and are at risk of defaulting on their debt.
Trichet’s comments should not however undermine the whole concept of a “United States of Europe.” which has shown weakness during these times of financial crisis.
He acknowledges that the institutional framework of the euro zone needs to be addressed urgently. Meanwhile, he urges the need of individual euro zone economies to restore their own competitiveness.
He believes there should be new rules put in place to impose sanctions against governments who go beyond budget guidelines similar to Germany’s new rules on capping new loans.
“The implementation of sound fiscal and macroeconomic policies is best ensured if these are solidly anchored at the national level,” Mr. Trichet said. “An effective way of achieving this is to implement strong national budgetary frameworks in the euro-area member states.”
After Trichet’s speech, the Euro strengthened broadly. The Euro had hit a record low against the Swiss Franc this morning and slowing edged higher post speech after 14:00 GMT.