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Interview with El Mercurio

27 January 2005

Interview with Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank.

English translation of an interview published in the edition of El Mercurio, dated 27 January 2005. The publication of the translation was authorised by El Mercurio.

Mr José Manuel González-Páramo describes his position as a Member of the Executive Board of the European Central Bank (ECB) as “the pinnacle of a career devoted largely to central banking, after a decade spent working within the governing bodies of the Banco de España”. For him, working as a member of the team forming the governing bodies of the ECB is a privilege since he is able to contribute to the ongoing process of monetary union. Mr González-Páramo arrives in Chile today to attend the “Foro Chile-Unión Europea” (Chile-European Union Forum).

Just how worrying is the strengthening of the euro against the dollar?

As regards exchange rates, I confirm the position adopted by the ECB’s Governing Council when the euro rose sharply, that such exchange rate fluctuations are unwelcome since they do not favour economic growth.

The strength of the euro is reducing the competitivity of European goods. Does this situation give cause for concern?

Account must be taken of the fact that an economy’s exports are affected by a range of variables, of which exchange rates are but one, and these do not always have an overriding influence. From this perspective, exports from the euro area are benefiting from fairly robust global economic growth. The outlook for global growth in 2005 is also quite promising. Thus, exports from the euro area will continue to benefit from this strong global demand.

Do you think we will ever see the euro replace the dollar as the most significant currency?

The internationalisation of any currency depends on the preferences of economic actors. As such, it is clear that stable currencies and currencies that inspire confidence are more likely to gain ground on the global markets.

In any case, the Eurosystem maintains a neutral stance with regard to the internationalisation of the euro, although, of course, the fact that our monetary policy is geared towards price stability indirectly helps to support this role. Within six years, the euro has become the second most used currency in the world. This can be seen, of course, as further testament to the success of monetary union.

What do you think 2005 will bring for the euro area countries?

According to current forecasts, growth in the euro area will continue at a sustained but moderate rate over the medium term. The macro-economic forecasts published by the Eurosystem experts in December 2004 estimate year-on-year real GDP growth at somewhere between 1.4% and 2.4% in 2005.

What are the main economic problems facing the region?

The economic growth difficulties, which have beset the euro area economy over the past three years in spite of the favourable financing conditions prevailing, highlight the existence of a number of structural problems. These affect both employment and productivity.

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