Tags: euro | europe | cuts | recovery

Experts: Euro's Drop Will Help Europe Rebound

By    |   Wednesday, 30 Jun 2010 08:56 AM

Not everyone is bearish on Europe’s economy.

The slumping euro and fiscal austerity plans that have emerged from Europe’s debt crisis represent the tonic to cure its ailing economies, some experts say.

Fear that Greece would default on its debt led a number of countries to embark on budget deficit-reduction plans, including Greece, Spain and Germany.

“By implementing economic reform and taking some pain, there’s long-term gain,” John Stopford, co-head of fixed income at Investec Asset Management, told Bloomberg.

The euro has dropped about 15 percent so far this year to $1.2259 recently.

That decline can help European economies by boosting their exports, as it makes them cheaper in dollar terms.

“The advantage of the euro drop is it will continue to support the recovery,” Emeric Challier, a money manager at Avenir Finance Investment Managers, told Bloomberg.

He expects a rally in Spanish, Portuguese and Italian government bonds.

Tension is developing between the Obama administration, which fears a quick reversal of fiscal stimulus in Europe will hurt the global recovery, and European nations trying to curb their budget deficits.

“Everybody wants a self-sustaining recovery in private-sector demand, but how?” Daniel Gros, director of the Center for European Policy Studies, told the New York Times.

“By keeping deficits high — the U.S. approach — or by starting the exit now to strengthen private-sector confidence — the EU (European Union) approach? Who knows what will work better?”

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Not everyone is bearish on Europe s economy. The slumping euro and fiscal austerity plans that have emerged from Europe s debt crisis represent the tonic to cure its ailing economies, some experts say. Fear that Greece would default on its debt led a number of countries...
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Wednesday, 30 Jun 2010 08:56 AM
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