BRUSSELS, Oct 31 - Eurozone policymakers favour a a strong and stable euro and confidence in the currency is an important part of economic growth, the next president of the European Central Bank said on Friday. "It has been said very clearly by the ECB, (ECB President) Wim Duisenberg, and the full body of finance ministers in the Eurogroup that we are pursuing a strategy of a strong and stable euro currency," Bank of France Governor Jean-Claude Trichet said in an interview with German television ZDF that was recorded in Brussels. Asked whether the euro-dollar rate was in balance, Trichet said that supply and demand in foreign exchange markets set currency prices. "Nothing to add at this stage," he said. Trichet, who takes over the ECB presidency on Saturday, also said the ECB Governing Council agrees that "we have to do all that is possible to reinforce general confidence in the euro zone," and that includes fiscal reforms. The currency also plays a role, he said.
"The credibility and confidence in the currency is extremely important. It reinforces confidence in the EU economy, is part of the ingredients that are necessary for having sustainable growth." A credible euro also encourages savers and investors if they can trust the value of the currency. It also is conducive to sustainable growth without inflation, he said. The euro zone economy stagnated in the second quarter and ECB policymakers are forecasting a very gradual recovery has begun and will continue through most of next year. For that to happen, they are anxious to see a pickup in business and consumer confidence translate into real economic activity. Despite the uncertain and sluggish growth outlook, when Trichet heads his first Governing Council meeting next Thursday the central bank is expected to keep interest rates steady at 2.00 percent. So far Trichet has kept a relatively low profile. His remarks to ZDF-TV, however, about favouring a strong euro are more forthright than those ECB policymakers have made recently. They have stuck to the general line that the euro is trading around its historical average. Business people, especially in Germany, have been fretting that the strengthening currency could strangle the very tentative recovery by crushing export demand. On the other hand, analysts in financial markets fret that euro strength will push inflation dangerously low and create a deflation risk for the euro zone.//