German finance minister sees no signs of euro deflation spiral

Monday 14 April 2014 09.26
Wolfgang Schaeuble said a rising exchange rate could hurt Europe's economic development
Wolfgang Schaeuble said a rising exchange rate could hurt Europe's economic development

German Finance Minister Wolfgang Schaeuble has said he sees no signs at all of a deflation spiral in Europe.

In an interview with Germany's Deutschlandfunk radio, Mr Schaeuble also said European Central Bank President Mario Draghi had made a convincing case at the recent International Monetary Fund meeting that Europe's low inflation held no deflation risk.

He added, "of course the exchange rate is strong and if it were to continue to rise then it could negatively impact economic development in Europe, which has improved but needs to improve further.

“If European goods become too expensive and imports too cheap then that is not good."

Mr Schaeuble added the Ukraine crisis was the biggest geo-political risk facing the world economy.

On Saturday Mr Draghi said that the bank may need to take action to stem the rising euro.

"The strengthening of the exchange rate would require monetary stimulus" as long as interest rates are already extremely low, he said.

Mr Draghi also said that the ECB "should not be complacent" about extremely low inflation, which many fear could stall Europe's economic rebound.

Low inflation, he noted, puts a damper on demand, makes it difficult for troubled economies to make policy adjustments, and makes it tough for businesses and governments to cut their debt burdens.

"We could do further easing... and use unconventional measures," he said of ECB policy.