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Last Updated: Friday, 3 June, 2005, 17:28 GMT 18:28 UK
Is Europe's passion for the euro fading?
Analysis
By Jon Cronin
BBC News business reporter

Man with a euro note
The euro has its sceptics across Europe's heartlands

It was an idea that could barely be whispered inside Europe's corridors of power - might the European Union lose its appetite for the euro?

Launched amid much fanfare in 1999, the single currency was a symbol of European unity, a sign of the continent's re-emergence on the world stage and a challenge to the hegemony of the US dollar.

Six years on, with slow growth and high unemployment bedevilling the economies of some of the euro's most powerful supporters, the whispers of doubt are beginning to grow louder.

Leading politicians in Berlin have expressed concern that the tight rules governing the euro are strangling Germany's economy, by far the biggest in the 12-nation eurozone.

The country's finance minister and central bank president reportedly attended a meeting where the "collapse" of European Monetary Union was discussed.

Meanwhile, a senior member of Italy's coalition government has openly demanded a referendum which would call for the abolition of the euro and the reintroduction of the Italian lira.

Falling currency

All this is thrown into sharp relief by the "No" vote delivered by voters in France and the Netherlands against the EU constitution.

Shortly after the Dutch rejection on Wednesday, the euro sank to an eight-month low against the dollar of $1.2158.

So is Europe's great experiment in monetary union running out of steam?

German Economy Minister Wolfgang Clements lashed out at the euro on Thursday, claiming the currency union was stifling Germany's already stagnant economy.

In particular, he criticised the level at which eurozone interest rates were being held, saying they took too little account of Germany's needs.

The European Central Bank decided to keep rates on hold at 2% for the 24th month running on Thursday, but many economists believe Germany's economy needs a level closer to 1%.

"The European-wide interest rate does not take enough account for my taste of Germany's contribution to the rest of Europe," Mr Clements said.

Break-up talks

His comments came little more than a day after a politically explosive report suggested Germany's government was planning to blame the euro for the country's economic weakness.

German Finance Minister Hans Eichel (right) and Bundesbank President Axel Weber
Reports suggest Germany is distancing itself from the euro

Stern magazine said finance minister Hans Eichel and Bundesbank president Axel Weber had been present at a meeting where the "collapse" of monetary union was discussed.

Both men were quick to deny that they had personally contributed to any discussion of currency union break-up. But the mere presence of two of Europe's most powerful finance officials at such a discussion sent nervous ripples through the world's currency markets.

Stern also published a survey suggesting 56% of Germans wanted to go back to the Deutschmark.

'Unique success'

Germany is not alone among the eurozone's major economies to be showing some political restlessness about the euro.

Italian Welfare Minister Roberto Maroni on Friday called for a referendum to decide whether his country should ditch the euro and revert to the lira.

Although a member of the euro-sceptic Northern League party, Mr Maroni's views could generate support among Italians unhappy at high prices which many blame on the introduction of the euro.

Still, despite the growing discontent, the break-up of the monetary union is a subject most of Europe's leaders are keen to avoid.

Pasta shaped in the form of a Euro in an Italian shop window
Daily bread: is Italy's love affair with the euro a flash in the pan?

The huge political and economic costs alone would be enough to deter most governments.

Posturing against the euro in Germany and Italy may also be as much about national politics as concern over Europe's wider destiny.

Germany's ruling Social Democrats (SPD), who have been heavily criticised for their running of the economy, are likely to face a general election this year. Italy, meanwhile, has seen its economy tip into recession.

And despite the grumblings, the official view from Germany is still upbeat.

"Finance Minister Eichel and Bundesbank President Weber see the euro as a unique success story and an important step in securing the future of Europe," the Bundesbank has said.

Most experts agree that the euro's recent downward tumble against the dollar owes far more to interest rate hikes in the US than to the crisis currently engulfing the European Constitution.

The euro remains comfortably above its launch value against the dollar, while its recent decline on the currency markets will come as welcome news for exporters in the eurozone.

The euro may be down but for now, at least, it's not out.


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SEE ALSO:
Euro sinks after Dutch 'No' vote
02 Jun 05 |  Business
Euro report whips up German storm
01 Jun 05 |  Business
Blair signals no to joining euro
28 Apr 05 |  Election 2005
German jobless rate in shock dip
28 Apr 05 |  Business
ECB 'concerned' about euro deal
21 Mar 05 |  Business


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