EU president says EU recovery, euro strong

May 18, 2011 - 7:44 AM
China EU

European Union President Herman Van Rompuy delivers a speech on trade and economic issues at CEIBS (China-Europe International Business School) on Wednesday, May 18, 2011 in Shanghai, China. The European Union's economic recovery is gaining momentum and the euro remains a strong, well trusted currency despite debt and deficit crises, the president of the 27-member block said Wednesday. (AP Photo/Eugene Hoshiko)

SHANGHAI (AP) — Ailing European economies are getting their houses in order and the euro remains a trustworthy currency, the European Union's president said Wednesday, describing the region's recovery as "not bad at all."

"Newspaper headlines might sometimes overshadow that the economic recovery in Europe as a whole is on track and even gaining momentum in some member states," Herman Van Rompuy said in a speech to the China Europe International Business School in Shanghai.

"Our economic fundamentals remain sound," he said.

While forecast European growth rates of 1.8 percent this year and 2.0 percent in 2012 may appear modest compared with China's near 10 percent pace, they reflect the maturity and prosperity of the region's economies.

"It is really not bad at all," he said.

All 27 EU members are reducing their fiscal deficits, Van Rompuy said. And although Europe is still muddling through bailouts of Greece and Ireland and working out arrangements to stabilize Portugal, those countries account for only 7 percent of the gross domestic product of the world's largest combined economy.

"The members of weak economies have to do their homework and have to put their houses in order and that is what they are doing," Van Rompuy said.

Regardless of the challenges all governments face in bringing their deficits and debts under control, "the euro remains a "very strong currency trusted by investors worldwide," Van Rompuy said.

He also defended the U.S. dollar, saying that challenges to its dominant role in world finance and trade crop up each time it weakens, but are premature even though the Chinese currency is bound to eventually take on a more important role.

"It is a useless exercise to say we should downplay the role of the dollar."

Returning to Beijing as he wrapped up his visit to China, Van Rompuy met later Wednesday with Vice President Xi Jinping, who is widely expected to become China's next top leader.

"You have made effective efforts in strengthening Europe's economic governance and addressing the sovereign debt crisis," Xi told Van Rompuy.

In both Beijing and Shanghai, Van Rompuy urged China to do more to make its economy a level playing field for foreign business, especially in the area of government procurement.

The EU, which has a population of about 500 million, is China's largest export market, but European firms have been battered by low-cost Chinese textiles, leatherwear and other goods. Meanwhile, European companies, along with other foreign firms, complain of regulatory barriers hindering their ability to compete freely in China. Beijing's currency controls, which help boost Chinese exports, are also an irritant.

China needs to keep moving toward more "appropriate exchange rates," Van Rompuy said.

"The impact of one's exchange rate on the global system is bigger to the extent one's economy grows," Van Rompuy said, saying progress had been made in the past six months, as China's yuan was allowed to appreciate from roughly 6.6 to the U.S. dollar to the current level of about 6.5.

While in China, Van Rompuy met with Chinese Premier Wen Jiabao for talks on topics ranging from trade to human rights and copyright protection and to prepare for a 14th EU-China summit later in the year. Van Rompuy met with Chinese President Hu Jintao on Monday.

The EU is among foreign governments and rights groups that have expressed concern over the detention of famed avant-garde artist and government critic Ai Weiwei, the highest profile figure so far to be swept up in a Chinese crackdown on political dissent that has seen hundreds of bloggers, academics, lawyers and activists questioned, detained or arrested while others have simply disappeared.

Van Rompuy made only a passing mention to human rights issues in his remarks Wednesday, suggesting to his business school audience that respect for social justice and human rights is essential for stability and sustainable economic development.