Europe vows not to bring in formal control on euro's exchange rate
THE EU will not put in place a formal policy to manage the euro's exchange rate so long as market prices reflect the "fundamentals" of the single currency.
That was the message from EU finance ministers yesterday as efforts to head off demands for such a policy from France continued in Brussels.
Speaking after the Ecofin meeting yesterday, both Finance Minister Michael Noonan, who is chairing the group, and EU Commissioner Ollie Rehn said there were no plans to manipulate the euro's strength.
Mr Noonan will travel to Moscow tomorrow to represent the EU at this weekends G20 meeting and yesterday European ministers agreed they would continue to allow the single currency to have market forces define its value.
The Ecofin meeting came as the G7, which includes the US, Canada, UK, France, Italy, Germany and Japan, said it was not in favour of a state managing its exchange rate.
In what was seen as an attempt to avert a currency war before it started, the group of the world's richest nations said they "reaffirmed that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives".
"We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for stability. We will continue to consult closely on exchange markets and cooperate as appropriate," the group said.
A G7 spokesman was forced to clarify the comments after markets interpreted the statement as a "green light" for Japan to weaken the Yen. The spokesman said the statement had actually been intended to express concern about the Japanese efforts.
"Exchange rates in our view . . . should reflect economic fundamentals and be market oriented, and if that's the case that should help us build a more stable monetary system," said Mr Rehn.
Mr Noonan said the group welcomed the commission's second Alert Mechanism Report, which claimed there were "fiscal imbalances" in 14 member states that needed to be addressed.