MercoPress. South Atlantic News Agency

Euro appreciation alarm is on

A major appreciation of the Euro in world money markets could harm the European economy debilitating the still tepid domestic demand and endangering fiscal policy, according to the Organization for Cooperation and Economic Development, OCDE.

Jean Philippe Cotis, head of the OCDE Economy Department addressing the World Economic Forum in Davos, Switzerland, warned that a further 10% appreciation of the Euro "is enough to finish with all current achievements".

However he was quick to point out that he didn't favour "excessive money market intervention" or "free floating".

Mr. Cotis illustrated his point saying that Europe was flying with an only engine and if forced into "turbulence areas" the other engine could suffer and expose the whole continent to serious instability.

Mr. Cotis recalled that Germany's economy still has to take off which conditions the rest of the continent.

"In the Euro zone, recovery is more modest than in the US" where growth reached its apogee in the third quarter and should remain strong indicated Mr. Cotis.

Further on the OCDE report points out that GDP real growth is stronger in Japan than in the Euro zone, although both areas are exposed to weakened "domestic demand" which is a manifestation of consumers "lack of confidence" and propensity "to spend less".

Mr. Cotis also regrets that "Europe has lost control of its fiscal policy" to the extent that it has gone beyond countries domain. Mr. Cotis was referring to the controversial decision to allow France and Germany ignore the 3% GDP budget deficit cap, one the basic stabilization accords of the EU.

However Mr. Cotis underlined that the US budget deficit estimated to reach 450 billion US dollars annually is "unsustainable".