Draghi warns currency war may hurt European growth this year

 
Tim Wallace
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THE STRENGTH of the euro risks harming economic growth and pulling down inflation too far, European Central Bank boss Mario Draghi told European parliamentarians yesterday.

The bank president hit out at talk of a currency war between states vying to push down their exchange rates and improve their economies’ competitiveness, insisting the policies affecting currencies are validly targeting growth.

But he also said he will keep a close eye on the euro’s value as it could hurt the bloc’s emerging economic recovery.

“Most of the exchange rate movements that we have seen were not explicitly targeted, they were the result of domestic macro economic policies meant to boost the economy,” Draghi said.

“In this sense, I find really excessive any language referring to currency wars.”

The G20, which met in Moscow last week, argues that exchange rates must not be targeted explicitly, with policies that devalue a currency only used for other ends, with the side effect of cheapening a country’s exports.

Quantitative easing has played a major part in driving down the sterling, yen and US dollar, making the euro more expensive.

And with Japan’s central bank adopting a new, higher inflation target, downward pressure on the currency is set to increase.

“We will have to assess in the coming projections whether the exchange rate has had an impact on our inflationary profile,” Draghi said.