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 Jonathan Charles reports for BBC News"Mr Schroeder tried to curry more favour with Germans"  real 28k  Paul Chertkow of the bank of Tokyo, Mitsubishi"It's hardly a statement of confidence"  real 28k |
Euro on the brink
ECB president Wim Duisenberg says no to intervention |
The European single currency has made a weak recovery on the financial markets after hitting record lows against both the dollar and the pound.
The euro fell below $1 for the first time overnight.
On Thursday, the euro crashed through the $1, ending at 0.994 to the dollar. Since then, it has edged back to around 1.0029.. Many investors think the currency could fall below parity again, even if only temporarily.
The fall in the euro comes less than a year after it was launched and by breaching the psychologically important barrier, the euro increased worries about its long-term viability.
Divided union
Part of the reason for the currency's fall has been increased bickering between the member states.
On Friday, German Chancellor Gerhard Schroeder criticised Britain for damaging the European Union with its intransigence in negotiations on tax.
Earlier this week, it was reported that Finance Minister Hans Eichel had blamed the UK for the euro's weakness, comments he later said were misinterpreted.
Chancellor Gerhard Schroeder has also been accused of damaging Europe's image by meddling in high-profile corporate matters.
 It does not enhance the image that we want to have of being an increasingly market-driven economy across the euro area  |
| ECB President Wim Duisenberg on German intervention |
EU Competition Commissioner Mario Monti and European Central Bank President Wim Duisenberg said separately that the moves had worried markets that Europe was returning to protectionist ways.
Mr Duisenberg said the intervention to rescue Holzmann had damaged Europe's image as being committed to market-driven economics.
Another reason for the currency's fall is that economic growth in mainland Europe appears to be less strong than in the United States.
But most projections suggest that the position will be reversed in the next few years, as growth slows in America and accelerates in the eurozone.
The crisis will be seized upon by eurosceptics in Britain. They will see it as further proof that the British should stay out of the project.
Europe plays down weakness
So far, the European Commission has played down the weakness in the euro, as it says the weakness will help exports.
"It's not worrying for Europe at this moment. It helps our exports. I think the UK should be worried by the high level of its pound sterling," a spokesman for the President of the European Commission said.
"Currencies go up and down and I believe that much more than the euro, it's the dollar that is the strong currency at the moment," he added.
No to intervention
Earlier, the European Central Bank (ECB) told currency markets that it saw no need to intervene.
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Mr Duisenberg and the other members of the ECB's governing council, though, appear to be taking a long-term view.
Speaking after the bank's fortnightly meeting in Frankfurt, he said he would be concerned if the euro did not appreciate over time.
Day-to-day movements in the euro exchange rate alone would not be enough to trigger an ECB policy decision, said Mr Duisenberg.
The ECB has until now pursued a policy of 'benign neglect' - monitoring the situation, talking up the euro, but refusing to intervene directly in the markets.
It recently raised interest rates by 0.5% to 3%, partly to ward off inflation - a move that briefly boosted the value of the currency.
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See also: |
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03 Dec 99 | Business |
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EU to examine Holzmann rescue |
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03 Dec 99 | Business |
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When is a weak euro a problem? |
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30 Nov 99 | Business |
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Germany denies blaming UK for weak euro |
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30 Oct 99 | Business Basics |
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European Central Bank |
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04 Nov 99 | The Economy |
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Euro-zone rate rise |
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09 Nov 99 | The Economy |
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'Jury still out' on City and euro |
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