Only way is up for euro, tips ECB chief
By MARK MILNER
LONDON
Tuesday 4 January 2000
Wim Duisenberg: Upward potential.
Economic growth in the 11-nation euro zone will outstrip that of the United States over the next two years, according to Mr Wim Duisenberg, the president of the European Central Bank.
That should benefit the euro, the European single currency, which made its debut on foreign exchanges a year ago and has since lost about 13 per cent of its value against the US dollar. ``We expect during the course of this year the euro will go in the opposite direction ... The euro has strong upward potential,' the ECB president said on Sunday.
The fall in the euro from its launch rate of about $US1.17 to near parity with the dollar has proved a mixed blessing for the euro zone. So far the region has enjoyed the benefits of a competitive exchange rate without inflation taking off, but the decline in the euro's international value has not enhanced its prestige as a reserve currency.
Part of the reason for the decline has been the relatively sluggish performance of leading Euroland economies compared with the US.
The currency has also been troubled by rows between the Frankfurt-based ECB and the German Government over the need for Europe's biggest economy to restructure. Such openly conflicting views, coupled with the ECB's studied avoidance of intervention in the foreign exchanges, helped maintain the downward pressure on the fledgling currency.
Although Mr Duisenberg and his colleagues are keen to see the euro recover at least some of the ground lost over the past year, the ECB president played down the importance that tended to be attached to the exchange rate.
``Europe needs to learn a little bit, I think, that the effect of a change in the level of the currency on the national economy ... is much less for the whole single Europe than it was earlier on an individual member state.'
GUARDIAN
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