Euro provides price stability & credibility to EU

21 May '07

4 min read

Euro as a single currency has demonstrated the potential to bring enormous benefits to European nations by bringing high degree of stability and prosperity, said Mr. Christian Noyer, Governor, Banque de France at a meeting organized by the Confederation of Indian Industries (CII), here on Friday.

Talking on benefits of Euro, he said that Euro has brought price stability and over the last years inflation has stayed broadly in line with the price stability objective set by the European Central Bank.

Mr. Noyer said that European households and companies are reaping the benefits of the credibility and even after the recent increases in the short term rates, monetary and financial conditions remain extremely favourable for investment and growth.

He said that Euro has given boost to financial integration in Europe and in many segments, European financial markets have reached the depth and liquidity which, up to now, were preserve of dollar markets.

He added that Euro provides a high degree of credibility of monetary policy reflected in the level of long-term interest rates; diminished exchange rate volatility; completion of the single market and encouragement to cross-border trade.

Mr. Noyer said that European economy is set to deal with any contingency and with necessary structural reforms; EU can keep the economy on a path of growth and stability. The monetary policy framework of the Euro-system is “medium-term” oriented, added the Governor.

He said that the monetary policy framework of the Euro-system rests on the economic analysis that examines cyclical, economic and financial indicators related to the main determinants of short-term inflation. Mr. Noyer further added that the “monetary analysis” looks at the behaviour of money and credit aggregates and provides a perspective on long-term inflation.

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