Volcker Says Europe Committed to Common Currency

May 19, 2010

Europe’s $1 trillion economic rescue signals a recognition of the threat to the euro currency and a commitment to defending it, former Federal Reserve Chairman Paul Volcker said Tuesday.

Volcker, a special adviser to U.S. President Barack Obama, said in London last week that Europe’s debt troubles had led him to worry about the future of the currency.

In an interview in California with Fox Business News, Volcker said, “I think what is going on in Greece is obviously a challenge to the euro and to the success of the euro.” But he added that Europe has “shown a determination to keep this together.”

Asked whether parity with the dollar was where the euro was headed, Volcker noted there had been a lot of ups and downs in the currency. “I think these fluctuations, frankly, are excessive,” he said.

Turning to the U.S. economy, he said he was not worried about inflation but warned it could become a problem in the future and that the big budget deficit added to the risks.

“We are running a big deficit,” Volcker said. “We’ve been too consumption oriented, too little investment oriented, too little export oriented. Those are huge challenges.”

(Writing by Caren Bohan; Editing by Will Dunham)

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