The European Central Bank

Abstract

While the U.S. Federal Reserve has already lowered interest rates, the ECB has delayed a similar decline in interest rates. Indeed, the ECB sees Europe as "Robust" and sees no need to lower its interest rates. In trying to cope with inflation, the ECB did not realize that the risk of a slowdown was more important.

Knowing that the U.S. and the UK are the two largest trading partners of the euro area (accounting for one third of trade outside the euro area) in February 2008, they can no longer cope with the weight of the euro. This problem posed by a strong euro combined with slower growth in the UK and the U.S. die to recession does not facilitate trade. Gold trade can be considered a determinant of growth. The Euro penalizes exports (even if it allows imports) and causes slow growth in developed countries.

Also, while France, Germany, Italy and Spain account for 80% of GDP in the euro area, growth of the latter shows overwhelming signs of weakness partly due to the global financial crisis. It is therefore clear that there is a veritable risk of economic slowdown and that a drop in interest rates could limit it.

Tags: U.S. Federal Reserve, Robust, France, Germany, Italy, Spain and GDP