A key member of the European Central Bank (ECB) has highlighted tensions in the international currency markets, raising the threat that competitive devaluation could have on the euro zone’s economic recovery.
Yves Mersch, executive board member of the ECB’s key monetary decision-making body, told CNBC at the Ambrosetti Workshop in Italy that the central bank’s recent deposit rate cut, further into negative territory, was not an attempt to strengthen the euro’s hand in the international foreign exchange markets.
What the bank is targeting, Mersch said was that “everyone is living up to the promises of how the international monetary system is being run.”
“And that means they should not be competitive devaluation. There should not be beggar-thy-neighbor policies. And the areas that (are) already more on the safer side as what concerns growth and inflation should not try to talk down their currencies.”