Norwegian central bank Governor Oeystein Olsen said there’s no way back now for Europe’s monetary union as the common currency has reached what he described as adolescence amid a decade of stagnant growth.
“There’s little point in discussing whether the original idea was a good one or not,” Olsen said in the text of his annual speech today in Oslo. “The child was born and is now a teenager. As expected, puberty has presented problems.”
The debt crisis that broke out in southern Europe in 2009 turned into a near-death experience for the euro, then only 10 years old. Sentiment has since improved after European Central Bank President Mario Draghi last year pledged to do whatever it takes to keep the 17-nation currency bloc intact.
Norway, western Europe’s largest oil producer, has joined Switzerland in staying outside the European Union. The country’s oil wealth has helped it withstand the fallout of the debt crisis further south, keeping unemployment at about 3 percent.
Growth in the mainland economy, which excludes oil, gas and shipping, will slow to 3 percent in 2013 from 3.75 percent last year, the central bank predicts. That compares with a 0.3 percent contraction in the euro area, according to the European Central Bank’s forecast.
Olsen said recent steps in Europe, including closer cooperation and coordination of economy policy, have put the region on a path to recovery. The region is also reducing deficits even amid “strong headwinds” from austerity measures, he said.
“However, the path ahead is long,” Olsen said. “We may have to wait until the next decade before growth gains a firm footing in Europe.”
The recession in the euro area was worse than economists forecast as the region’s three biggest economies saw output slump, a separate report showed today. GDP fell 0.6 percent in the fourth quarter from the third, marking the deepest decline since the first quarter of 2009.
Norway’s central bank left its benchmark interest rate at 1.5 percent for a fifth meeting in December and signaled it may raise rates as early as next month to cool record debt growth.