EU Banks on U.S. to Rebound From Slowdown, Buoy Global Growth
European Union leaders are counting on the slowing U.S. economy to rebound quickly, helping Europe avert a recession, Luxembourg Prime and Finance Minister Jean- Claude Juncker said.
The U.S. has “a strong economy and won't continue its downward slope for all eternity, so in Europe we don't face the risk of a recession,'' Juncker told reporters early today after the first session of an EU summit in Brussels.
EU leaders voiced concern that all-time highs for the euro and oil prices will combine with volatile financial markets to undermine growth, while stopping short of calling on the European Central Bank to reduce interest rates.
ECB officials have ruled out cuts in the main 4 percent interest rate, saying the economy can get along without a boost and warning that inflation will surpass the bank's 2 percent limit for a 10th year in 2008.
Juncker, who heads the panel of finance chiefs from the 15- nation euro region, said financial markets have punished the dollar because of undue pessimism about the U.S. economy.
The euro reached $1.5645 yesterday, the highest since its 1999 debut, adding to concern that European exports will suffer bad credit payday loans free credit report instantly.
Five U.S. rate cuts in the last six months along with steady rates in Europe have driven down the dollar, leading to “pressure on export industries in Europe,'' Swedish Prime Minister Fredrik Reinfeldt said. “And if you add to that also a rise in the oil price, you have enormous pressure.''
Euro-Area Growth
The ECB last week shaved its prediction for euro-area growth to about 1.7 percent in 2008 from a December forecast of 2 percent, and trimmed its 2009 forecast to 1.8 percent from 2.1 percent.
“The European economy can't be completely immune from certain developments that have already taken place in the financial markets,'' European Commission President Jose Barroso said.
The dollar's slump lured investors to commodity markets, pushing oil prices to a record $111 yesterday.
“The risks are now bigger than last year,'' Finnish Prime Minister Matti Vanhanen said.