Bundesbank chief: Eurozone crisis could last 10 years
Jens Weidmann, Germany’s central bank chief, has warned that Europe could take ten years to recover from the debt crisis. “Overcoming the crisis and the crisis effects will remain a challenge over the next decade,” said Weidmann. "We will also see that growth rates are lower than those we saw before the crisis."
He urged European governments to continue reforms and warned that "the calm that we are currently seeing might be treacherous." In an interview with the Wall Street Journal, Weidmann dismissed the suggestion that Europe was through the worst of its problems.
Instead, he indicated that the European Central Bank might have to cut interest rates to stimulate growth. However, the ECB key interest rate was lowered to a record 0.75 percent last year and has been kept at that level ever since. But while banks can borrow money from the ECB at such low interest rates, they have not lowered their own rates when lending to businesses or people.
The euro fell sharply against the U.S. dollar in response to Mr. Weidmann's remarks, which investors took as a signal that a rate reduction is in play. His warnings on the lasting debt-crisis effects weighed on European equities, as Europe's top stock index slumped to its lowest close of 2013. There can be no quick fixes from the ECB, he said.
Weidmann's comments come as the IMF warns that the global economy faces a “chronic” crisis if reforms are not completed. The IMF is calling for greater co-ordination to address banks weaknesses, saying progress so far has been “uneven”.
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