Padoan Says He Doesn’t See Strong Depreciation of EuroLorenzo Totaro and Scott Hamilton
Italy’s Finance Minister Pier Carlo Padoan said he doesn’t foresee a strong depreciation of the euro, while he would welcome a “softer” level for the common currency to aid European recovery.
“There are no obvious reasons to see a strong depreciation of the euro coming up,” Padoan said today in an interview with Bloomberg Television’s Francine Lacqua in London. “I would really welcome a softer euro, a bit lower euro, but this is different from the exchange dynamic in the short term.”
The euro rose against the dollar amid speculation the European Central Bank will refrain from additional stimulus next week, even as today’s data showed inflation in the region quickened less than economists forecast. The European Union’s statistics office in Luxembourg said the region’s annualized consumer-price inflation rate was 0.7 percent this month, compared with a more than four-year low of 0.5 percent in March.
“A lower euro would help the economy, would be more in line with fundamentals, and would take off some of the pressure towards deflation in Europe,” Padoan, 64, said.
The euro climbed to $1.3967 in March, the strongest since October 2011.
“Higher growth in the U.S. would suggest a higher dollar,” Padoan said. “It’s a bit of a puzzle why that’s not happening.” The 18-nation shared currency has risen 6.4 percent in the past 12 months, according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies.
The ECB is seeking to keep inflation at just less than 2 percent. Central bank President Mario Draghi said this month that a further appreciation of the euro would trigger more monetary stimulus. The ECB council meets on May 8.
“We can’t target the euro,” said Padoan, a former chief economist at the Organization for Economic Cooperation and Development. “The issue is to monitor closely the evolution of deflation expectations -- I believe the ECB is perfectly equipped to do that.”
This month Italian Prime Minister Matteo Renzi’s government passed measures to revive the nation’s economy, saying it forecasts a GDP rise of 0.8 percent this year.
A depreciated euro would benefit Italian exports and sustain the country’s recovery that started in the fourth quarter after more than two years of contraction.
“Growth is coming back,” Padoan said. “I hope we can do better than that,” he said when asked whether the economy could expand this year more than the government’s official forecast.
Padoan was Italian executive director at the International Monetary Fund from 2001 to 2005 and joined the OECD in 2007 as deputy secretary-general, adding the role of chief economist in December 2009.