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Eurozone finance ministers fret over strong euro

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Latest update : 2008-03-04

Eurozone finance ministers expressed concern about the strength of the bloc's shared currency after it soared to record highs on foreign exchange markets.

BRUSSELS — Eurozone finance ministers expressed concern on Monday about the strength of the bloc's shared currency after it soared to record highs on foreign exchange markets.

But despite sounding the alarm, the ministers stopped short of going beyond their carefully negotiated statements in the past about the undesirability of big swings in exchange rates.

"In the present circumstances, we are concerned about excessive exchange rate moves," Luxembourg Finance Minister Jean-Claude Juncker told journalists after chairing a meeting with counterparts from other euro countries.

"We don't think that the recent moves are reflecting economic fundamentals," he added.

Juncker, who is also Luxembourg's prime minister, was speaking hours after the euro struck a new record high of 1.5274 US dollars amid growing fears the US economy was lurching into recession.

"Of course, we are always concerned," said Slovenian Finance Minister Andrej Bajuk, whose country holds the European Union's revolving presidency. "This development is something that is not very encouraging."

A strong euro can be a double-edged sword for the eurozone economy, making its exports onto international markets less competitive while making imports of essential commodities like oil cheaper.

Dutch Finance Minister Wouter Bos struck a relaxed tone about the euro's strength, noting that the "fundamentals of European economy as a whole are pretty sound."

"When we created the European monetary union we wanted a strong currency, so now that we have it we should not complain," he said.

ECB president Jean-Claude Trichet stressed as he arrived for the meeting that it was "very important" that Washington is committed to having a strong dollar.

"In the present circumstances, I consider it very important what has been affirmed and reaffirmed by the US authorities, including the US treasury secretary and the president of the US, according to whom a strong dollar policy is in the interest of the US economy," Trichet said.

Economists and market participants give little credence to repeated statements from US Treasury Secretary Henry Paulson and US President George W. Bush in support of a strong dollar, noting that a weak dollar helps reduce the huge US trade deficit.

The head of the International Monetary Fund Dominique Strauss-Kahn said in Monday's edition of Le Monde that he believed the real problem of the euro, as well as being overvalued, was the all-powerful position of the European Central Bank.

"There is no counterweight in the shape of a real European finance minister who would be tasked with ensuring growth," the Frenchman told the newspaper.

Paris has frequently attacked the ECB for neglecting growth in its quest to keep inflation under control and has called for a summit of eurozone leaders to discuss giving the bloc a sharper political edge.

"We don't share his new analysis suggesting that the European Central Bank is too strong," Juncker said.

Date created : 2008-03-04

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