ECB’s Stark: must avoid ‘fatal’ race to devalue

European Central Bank policymaker Juergen Stark said better global coordination was needed to smooth out currency swings, which must on no account be allowed to develop into a race to devalue, a newspaper reported.
Asked by German daily Handelsblatt whether the world was veering toward currency wars, Stark said, "It would be fatal to enter a race to devalue, which in the end will bring about protectionism. Protectionism in the 1930s is what led to the global economic crisis."
Stark said the yuan, which Beijing has resisted pressure from Washington and other developed nations to allow to revalue faster, was likely to appreciate.
"There are good reasons to assume that in future there will be a further appreciation of the chinese currency," Stark said in the interview published on Friday.
Stark, a member of the European Central Bank's governing council, appealed for global governments to adopt euro zone-style coordination of deficit levels.
While economic policy should still be managed by individual countries, "We should agree globally on principles for budget policy in the medium-term, like we do in Europe," he told the paper.
The process of monetary normalisation in the single currency zone was under way, he added.
Stark said a reduction in currency volatility and sustainable economic growth cannot be achieved without better coordination between fiscal, monetary and economic policy.
Stark said what was now needed is "better coordination than ever" among governments was needed.