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Friday, 4 January, 2002, 11:33 GMT
UK bank chief says euro 'undervalued'
Sir Edward George being interviewed by the BBC
Sir Edward George: Stronger euro would help Britain
The Governor of the Bank of England Sir Edward George has told the BBC he thinks the euro is "undervalued".

He said a rise in the value of the euro against the pound would help redress some of the imbalance between the manufacturing and service sectors within the British economy.

UK manufacturers have argued for some time that the pound is overvalued, which puts them at a disadvantage when they come to sell goods abroad.

Sir Edward also said that if the euro strengthened against the pound, it may bring the exchange rate closer to one deemed acceptable for Britain to join the single European currency.

Redressing the balance

"I'm absolutely unashamed and have been saying for some time that actually one of the most helpful things for the British economy would be to see the euro strengthen," Sir Edward told the BBC.

"I believe that the euro is undervalued if you look at it in terms of fundamentals."

"If the euro were to strengthen against currencies generally that would be a very positive thing I think for the imbalance we have in the British economy."

While demand from British consumers shows no signs of abating, the UK's manufacturing sector remains stuck in recession.

Official figures released last month showed UK industry was shrinking at an annual rate of 4.2% - its worst performance for a decade.

If the pound was to weaken against the euro, it would make British exports to the eurozone cheaper, which should help firms selling to these countries.

Aiding euro entry?

Sir Edward also acknowledged that if the euro was to strengthen against the pound, it might help Britain enter the European single currency if the country should decide to do so.

"It would also be a condition in which the possibility of entering the euro at a sustainable exchange rate was more favourable," he said.

"For the time being the weakness of the euro against (the pound) is a short-term obstacle."


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