Oil doesn’t run Euro economy
To listen to Europe’s politicians and central bankers, you may think it is the early 1970s all over again. Soaring oil prices are pushing the continent near recession. The sheiks are holding us all hostage.
Don’t believe it. Europe’s economic leaders are just creating a smoke screen. There is no reason why the increase in oil prices should be more than a minor hurdle.
Blaming oil for Europe’s woes is nonsense because it shifts the focus to something they can’t control, while deflecting attention from the real reasons for the region’s dismal showing.
“Obviously, oil prices have some impact on the euro-zone, but it is mainly just an excuse,” said Howard Archer, an economist at consulting firm Global Insight in London, in a telephone interview. “Even if you were generous and said the oil price had knocked half a percent off growth, then growth in the euro area still wouldn’t reach 2 percent this year.”
That hasn’t stopped politicians from lining up to pin the blame on oil. UK Chancellor Gordon Brown has already lowered his growth forecasts for 2005, citing oil as a reason. “The impact of the oil price rise is more considerable than was earlier thought,” Brown said at a press conference in Washington this month. French President Jacques Chirac has been calling on oil companies to find ways of boosting alternative energy sources. And European Central Bank president Jean-Claude Trichet said this month that oil prices will have “a very significant impact on growth and inflation over three years”.
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