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EU’s Barroso says euro cushioning oil price impact

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Europe has been shielded from the effects of rising oil prices to some extent by the strength of the euro, European Commission President Jose Manuel Barroso told a French newspaper in an interview released on Saturday.

“Today we buy a barrel of oil at €66, whereas if there were perfect parity, we would be paying more than €100,” Barroso told the weekly Journal du Dimanche. “Of course we’re concerned about this wide divergence in exchange rates, but at the same time we have to see that the so-called ‘strong’ euro -- or rather the weak dollar – has allowed us to cushion the impact of the rise in commodity prices,” he said. Barroso’s remarks, which echoed several of his recent comments on the euro, came after the European currency traded at about $1.53 and US oil prices hit a record high of more than $106 a barrel on Friday. He said he had full confidence in the European Central Bank and called for its independence to be respected, saying it would be a mistake for politicians to make comments on an appropriate level for the currency.

French politicians, including President Nicolas Sarkozy, have been among the most vocal critics of ECB policy and have repeatedly voiced concern about the strong euro and its impact on French exporters. Barroso said they should not ignore the role the euro has had in restraining inflation. “It’s one of the chief worries in France, but if we had a very strong devaluation of our currency, inflation would rise. Purchasing power, especially of those, who only have their salaries or pensions to live on, would be strongly affected. With a significantly weaker currency, we would have even more problems,” he said. (Reuters)

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