(Bloomberg) -- Goldman Sachs Group Inc. President Gary Cohn said that Europe still faces fundamental problems and that policy makers dont appear to have a plan for generating economic growth in the regions southern nations.
No one has solved the European economic issue for me yet, Cohn, 52, said in an interview with Bloomberg Televisions Susan Li in Hong Kong today. No ones given me an explanation of how were really going to create growth in Greece, or in Spain, or in other peripheral countries.
The regions economy is set to contract 0.1 percent this year before returning to growth in 2014, according to Bloomberg surveys of analysts. European Central Bank President Mario Draghis measures, including injecting funds into banks and offering the lenders unlimited cash, arent enough to bolster growth, Cohn said.
That is a good short-term solution to the problem, he said. It doesnt create economic growth. It creates financial stability in the banking system, but as I said, no economic growth.
The 17-nation currencys strength poses a big obstacle to the southern countries in the region, Cohn said. The euro is the best performer in a basket of 10 major currencies this year after the Swedish krona.
The euro has appreciated since Draghi took office on Nov. 1, 2011. He infused 1 trillion euros ($1.35 trillion) into banks, cut interest rates and offered to buy government bonds.
Deutsche Bank AGs trade-weighted index for the euro against peers including the dollar, yen, Swiss franc, British pound and Swedish krona rose 1.2 percent. The euro has climbed more than 10 percent against the dollar since Draghi pledged in July to do whatever is needed to preserve the currency union, and traded at $1.3527 as of 10 a.m. in London.
The euro will eventually have to start trading at the weighted average of what the individual nations former currencies would have been worth, Goldman Sachss Cohn said.
Youve got countries in the north where the currencys too cheap, youve got countries in the south where the currencys way too expensive, he said. The countries in the south have the need for economic growth. How they create that economic growth with a currency thats too strong? Very, very difficult.
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