Finance ministers voice concerns about euro

By Tony Barber in Brussels

Published: March 4 2008 11:19 | Last updated: March 4 2008 11:19

European finance ministers on Tuesday made clear their growing concern about the euro’s strength against the dollar, but said they had not pressed for co-ordinated central bank intervention in foreign exchange markets.

Ministers from the 15 eurozone countries issued a statement on Monday night saying: “In current circumstances, we are concerned about exchange rate moves… We don’t think the recent moves are reflecting economic fundamentals.”

They were reacting to the euro’s rise on Monday to $1.5275, the highest level it has touched since its launch in 1999. The euro has risen by 16 per cent against the dollar in the past year and is also stronger than some eurozone governments prefer against the yen and Chinese renminbi.

Financial market commentators noted that the eurozone statement was similar in tone to that used before the European Central Bank intervened in support of the euro in September 2000.

On Monday ministers drew attention to the fact that Jean-Claude Trichet, the ECB president, had emphasised before going in to the talks that the US authorities had said it was in the US national interest to have a strong dollar.

This was interpreted in financial markets as a warning signal from Mr Trichet about the dollar’s most recent slide against the dollar.

But on Tuesday at least one finance minister, George Alogoskoufis of Greece, said there had been no discussion among his colleagues of joint currency market intervention by the ECB and the US Federal Reserve. “No, no, there was no discussion of that,” he said.

He added: “There is a slight increase in the attention we are giving to currency market developments, because the turbulence continues and this is not something we want. But it does not mean anything dramatic…This is a global problem, it is not a European problem. I don’t think there is anything we can do on our own.”

Jean-Claude Juncker, the chairman of the eurozone finance ministers’ group, also avoided commenting on possible central bank intervention, saying: “I don’t think it would be wise to offer targets to financial markets.”

Some eurozone countries, such as Germany and the Netherlands, contend there are certain advantages in the euro’s strength, in that it is helping to contain inflation, currently at a 14-year high. In addition, they see little impact on the eurozone’s export performance.

Although the European Commission last month cut its 2008 economic growth forecasts for the eurozone, José Manuel Barroso, the Commission president, said on Tuesday the outlook was by no means bleak.

“We face economic headwinds that a few years ago might have been strong enough to sink us. But today Europe is continuing to grow and create jobs. Our employment rate at 66 per cent is our highest ever, and our unemployment rate at 6.9 per cent is the lowest for 25 years,” he said.

Copyright The Financial Times Limited 2008