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Interview: Eurozone certainly imperfect, but not unsustainable: CEPS director

(Xinhua)

08:23, January 29, 2012

BRUSSELS, Jan. 28 (Xinhua) -- Euro and the single currency, which are still young, have many deficiencies, but fears that the currency would collapse are overblown, a senior economist of an influential think tank said Saturday.

"The euro area is certainly imperfect, but that does not mean that it is unsustainable," Daniel Gros, director of the Centre for European Policy Studies (CEPS), told Xinhua.

Gros' comments came in response to British Prime Minister David Cameron who said on Friday that there is no systemic support to make euro a successful currency.

Speaking at the Annual Meeting of the World Economic Forum (WEF) at Davos, Cameron said that all successful single currency have the same characteristics and need to improve and mature as a support system.

"The eurozone's problem is not lack one of these systems, but simply a no," referring to the eurozone's lacking of "a strong unified central bank, a sound financial system, a high degree of integration and flexibility to respond to economic shocks," among other things, said the prime minister.

"I don't agree with Cameron," Gros said. The eurozone is still young, and the support system would be gradually installed as eurozone countries undergo structural adjustment, he added.

"Adjustment has happened in the past. Germany, for example, entered with an overvalued exchange rate, but then was able to adjust. Italy, Spain and other countries will also adjust," Gros said in an emailed message to Xinhua.

The CEPS director also said the adjustment would take time, but is expected to be completed gradually. "It will take longer than optimal, but it will happen gradually - provided financial market turbulence remains limited."

Gros specifically pointed Cameron's comment about the eurozone's lack of a strong unified central as something against the fact. "Luckily, the one point on which Cameron is dead wrong is the European Central Bank: it is very strong."


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