Eurozone policymakers favour a a strong and stable euro and confidence in the currency is an important part of economic growth, the next president of the European Central Bank said today.
"It has been said very clearly by the ECB, (ECB President) Wim Duisenberg, and the full body of finance ministers in the Eurogroup that we are pursuing a strategy of a strong and stable euro currency," Bank of France Governor Mr Jean-Claude Trichet said in an interview with German television ZDF that was recorded in Brussels.
Asked whether the euro-dollar rate was in balance, Mr Trichet said that supply and demand in foreign exchange markets set currency prices. "Nothing to add at this stage," he said.
Mr Trichet, who takes over the ECB presidency tomorrow, also said the ECB Governing Council agrees that "we have to do all that is possible to reinforce general confidence in the euro zone," and that includes fiscal reforms. The currency also plays a role, he said.
"The credibility and confidence in the currency is extremely important. It reinforces confidence in the EU economy, is part of the ingredients that are necessary for having sustainable growth."
A credible euro also encourages savers and investors if they can trust the value of the currency. It also is conducive to sustainable growth without inflation, he said.
The euro zone economy stagnated in the second quarter and ECB policymakers are forecasting a very gradual recovery has begun and will continue through most of next year. For that to happen, they are anxious to see a pickup in business and consumer confidence translate into real economic activity.
Despite the uncertain and sluggish growth outlook, when Mr Trichet heads his first Governing Council meeting next Thursday the central bank is expected to keep interest rates steady at 2 per cent.