Studio Guest: Ansgar Belke

Our studio guest this week is Ansgar Belke from the DIW economic institute.DW-TV: Every coin has two sides, and so does the Euro. For more, we’re joined by Ansgar Belke from the DIW, that's the German Institute for Economic Research in Berlin. So please tell us, what does the weaker euro mean for the German economy as a whole? Is it primarily good or bad? Ansgar Belke: In the first place, it's a stimulus program for the economy because exports become cheaper and imports become more expensive. This is a negative side of the coin. But on the other hand, it's also a huge stimulus program for the weaker European countries which are supported now by the big rescue package and this is the good news. DW-TV: So it's a big help for us as well. Now, I remember a time when the exchange rate against the dollar was one euro at 88.89 US cents. That was in about 2001, 2002 and since then, of-course, the euro has been rising and falling again until it peaked in about 2008, when it was at 1.60. In early 2010, the euro then took a nose dive and since then it's been hovering at around 1.22, 1.24, 1.25, so actually not that low compared to where it once started off. So why are we actually talking about a eurozone crisis? Ansgar Belke: Yes, it's kind of psychological framing, I would like to argue, because, please remember at the time the euro reached its all time high everyone spoke about the threshold of the euro. This happened three or four times, when the chief of Airbus argued that the euro is skyrocketing and the ECB should intervene for this purpose, and nowadays it's nearly the same. We find ourselves at the equilibrium level of the exchange rate, which is estimated by scientists at about 1.20 or so. The only problem is if the euro slides down even further, there would be a huge degree of exchange rate volatility which by itself hampers trade. This is well known. DW-TV: And this is what everybody's trying to prevent. There are these belt-tightening measures, these huge bail-...

Channel: sevenload Video Length: 0s Date Found: Fri, Aug 27 2010 12:04 AM Category: News Date Produced: Mon, Aug 23 2010 12:00 AM View Count: 0