EU leaders set to tackle debilitating rise of euro
Wednesday October 10 2007
EUROPEAN leaders went on the offensive yesterday over the rise in the euro, as Taoiseach Bertie Ahern blamed it for some of Ireland's lost competitiveness.
The European Central Bank President reminded currency markets that the ECB can intervene if it thinks the currency is moving too violently. "It is not a one-way bet," he told members of the European Parliament.
The Chinese currency movedto the top of Europe's hit list. The allegedly low value of the yuan, which has been tied closely to the dollar, is blamed for a surge in Chinese imports to Europe and for pushing up the euro as some of China's export earnings are re-cycled back into the European currency.
"First point China, second point dollar, third point Japanese yen," Jean-Claude Juncker, chairman of the eurozone group of finance ministers said after a meeting on Monday. He and Mr Trichet will visit Beijing before the end of the year with European Economic and Monetary Affairs Commissioner Joaquin Almunia.
The euro has risen by around 10pc against the dollar in just the last 12 months -- a rate of appreciation which the ECB may regard as being too rapid. It has always drawn a distinction between the actual level and the speed of change. "Excess volatility and disorderly moves are undesirable for economic growth," Mr Trichet told MEPs".
China has allowed its currency to rise marginally versus the dollar over the past two years but the yuan slipped against the euro in equal proportion. European politicians, especially French, complain that the eurozone is carrying the brunt of currency changes sparked by trade deficits and surpluses in the US and Asia.
"We note that the euro is playing its role for an orderly reduction of the imbalances," the eurozone ministers' statement said, with the implication that other currencies are not. Chief among these is the call for a rise in the yuan, but the Chinese authorities are very concerned about the possible effects on their economy.
Chinese foreign ministry spokesman Liu Jianchao responded by saying Beijing would stick to its policy of letting the yuan become more flexible "over time".
Mr Ahern told an IBEC conference that Ireland now needs to keep demands in line with changing economic realities. "We must manage expectations and ease inflationary tendencies by guarding against a wage inflation spiral. The social partnership deal will be crucially important in this," he added
