What to make of euro-dollar parity?
The euro is weaker than it has been in twenty years. This week it fell to parity with the US dollar. Economists blame the effects of the Ukraine war and the fight against inflation for the drop in the currency's value. Commentators examine the development from different perspectives.
The worst is yet to come
The euro's decline against the dollar will continue and break the one-to-one barrier, Denník N believes:
“First, US interest rates will rise faster and higher than those in the Eurozone. Second, rising interest rates will increase the cost of servicing the debt of the highly indebted countries Italy, Greece and Spain. Third, the high price of imported energy will hurt the Eurozone balance of payments more than the US. And fourth, the war in Ukraine will hit the Eurozone economy much harder than the US economy. Some sectors of the US economy, such as oil production or arms manufacturing, will even benefit from this war.”
ECB overstepping its brief
The central bank is not doing justice to its mandate to ensure stability if it intends to take over Italian government bonds, Berlingske finds:
“What should be deeply concerning to us is that the ECB has now not only taken responsibility for bringing inflation under control, but also for fiscal policy in the Eurozone. This represents a dangerous shift in the ECB's mandate to ensure stable, low inflation. ... The problem is that Lagarde and the ECB are now allowing Italy to blame the ECB for the failure when the markets lose confidence in Italian fiscal policy.”
Fear of recession sends prices tumbling
The euro's plunge also has its positive sides, columnist Amid Faljaoui explains in Trends-Tendances:
“With the euro at its lowest level in 20 years against the dollar, fears of a recession are growing in Europe and even in the US. The result is that commodity prices are falling, as slackening demand is anticipated. Even the price of oil is dropping. Long-term interest rates are also falling because investors think that inflation will eventually ease due to the economic slowdown. And this economic slowdown puts smiles back on the faces of stock market investors because lower inflation in the medium term also means lower interest rates.”