WHY EUROPE NEEDS A STRONG EURO

The weak euro has outlived its usefulness. The currency's weakness was appropriate during the first half of this year, when growth in Europe was sluggish. From now on, however, a persistently weak euro could hinder, rather than help, economic recovery, because it has led to higher market interest rates. It is time to change tack. A number of European officials, in government and at the European Central Bank, do not seem to see it that way. They have tolerated the euro's weakness. This has contributed to higher bond yields 10 year German government bonds have gone up 100 basis points since the beginning of June. Last week, these higher yields were endorsed by several ECB council members, suggesting their preparedness to raise ECB interest rates. Rising bond yields and a weak currency will impair Europe's recovery and undermine fiscal consolidation efforts. To put recovery on a sustainable path, Europe urgently needs to reverse its de facto weak currency policy.