Finland's Alexander Stubb Expresses Commitment to the Euro

on May 06 2013 8:32 AM

The euro traded steadily at $1.31 on Monday morning following last Thursday's European Central Bank interest rate cut. The bank met expectations and cut its already record low interest rate to 0.5 percent. The cut itself put pressure on the euro, but bank President Mario Draghi's press conference following the meeting was the main driver in weakening the currency.

Draghi indicated that the bank was technically ready to lower its deposit rate below 0, something that may have a negative effect on the eurozone economy. By lowering deposit rates, banks would have to pay up for holding large amounts of cash, which could in turn flood the market with euros. Draghi's statements were downplayed by his peers on Friday, who claimed lowering the deposit rate was only one of many possible options.

Also on Friday, Finland's Europe Minister Alexander Stubb spoke optimistically about the fate of the eurozone in at a Helsinki interview. Bloomberg reported that Stubb isn't expecting the eurozone to break up within his lifetime, and could grow to include up to 25 member states over the next few years.

The commitment to the success of the euro that Stubb expressed in his interview came just months after Finland demanded collateral in exchange for its bailout contributions. In order to protect itself from losses, Finland was the only nation to require a 40 percent collateral deposit which the nation will hold until its loan is repaid. However, on Friday, Stubb was relatively positive about the nature of the bailouts, saying that the bailout deals were necessary for the region's survival.

Moving forward, Stubb says the recovery is in the hands of national governments. At this point, individual members must deliver on their promises to generate growth and reduce budget deficits. .

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