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
[...] Possible solutions A decline in interest rates A very substantial decline in interest rates is needed to meet the financial shock that is currently ravaging the international community. Companies should be allowed to invest for the future, and Europeans to borrow money at lower rates to stimulate the economy. It should also reduce the level of the euro. On the graph of interest rates, we see that the Fed began cutting rates in January 2007 while the ECB waited until October 2008, a year and a half later. [...]
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