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Sunday, March 7, 1999 Published at 19:02 GMT


Sinking euro worries ECB

The plummeting euro keeps exchange rate boards ticking over

The president of Germany's Bundesbank is reported to have said the weakness of the euro on foreign exchange markets was a strong reason for the European Central Bank to leave its interest rates unchanged.

Hans Tietmeyer also said a rate cut would have few positive effects on the eurozone economy.

His comments are reported in Monday's edition of the German daily, Handelsblatt.

Sinking feeling


[ image: Hans Tietmeyer: The fall in value of the euro demands attention]
Hans Tietmeyer: The fall in value of the euro demands attention
Mr Tietmeyer told the newspaper that European monetary authorities were not interested in seeing the euro continually fall in value against the dollar.

A weaker euro could indeed stimulate the economy, but the new money needed confidence both within the currency zone and without, he said.

"Neither an overly weak nor an overly strong euro suits us," he said.

"Although you can't manage exchange rates, I believe that neither benign nor malign neglect of the exchange rate is correct."

The German central bank chief also warned of the negative consequences of constant demands for the ECB to lower rates.


[ image: Will they still be smiling about the euro at the end of the year?]
Will they still be smiling about the euro at the end of the year?
"The stronger this discussion is held in public, the narrower the leeway for monetary decisions," he was reported as saying.

His remarks follow the repeated requests by the German finance minister Oskar Lafontaine for euro interest rates to be cut from their current 3% level.

Toilet currency

Mr Tietmeyer's reported remarks come as some forecasts in London reckon the euro could be worth less than a dollar by the end of this year.

When it was launched the euro was worth $1.17. It now stands at around $1.08, a loss of 8%.

Traders at one of Germany's leading banks are said to have nick-named it the 'toilet currency'.

A plunge in the value of the euro would have considerable consequences, notably a crisis of confidence in the new currency and jeopardising the UK's membership.

Both Barclays Capital and the Commonwealth Bank of Australia forecast the euro will be worth less than one dollar by the end of the year.





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