Strong Euro Creating Deflation Risk, Belgium’s Geens Says

The strength of the euro is creating a risk of deflation and hampering Belgium’s exports, Belgian Finance Minister Koen Geens said after the currency last month reached a 29-month high against the U.S. dollar.

“We have high wage costs, so our export competitiveness is suffering from the high euro,” Geens told Bloomberg News in Brussels today. Belgium is the sixth-largest economy using the single currency.

“It also creates a risk of deflation because imports get lower priced in Europe because the euro is so high and that, together with low energy prices, creates an impression -- a perception -- of deflation,” Geens said.

The European Central Bank is “ready to act swiftly if needed” after the euro-area inflation rate fell to the lowest in more than four years last month, ECB Vice President Vitor Constancio told the European Parliament yesterday in Brussels. The inflation rate dropped to 0.5 percent in March, the lowest since October 2009, as energy prices declined 2.1 percent, data showed last week.

The euro reached a peak of $1.3967 on March 13, its highest level since October 2011. The 18-nation currency traded at $1.3774 at 2:10 p.m. in Brussels, up 0.2 percent on the day.

“Demand is not lowering and unemployment is certainly not increasing, but there is a perception of a deflation risk and that’s too bad,” Geens said.

To contact the reporter on this story: Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Jones Hayden, Zoe Schneeweiss

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