Posted on 03/03/2008 7:30:29 PM PST by kiriath_jearim
BRUSSELS, Belgium (AP) - Finance ministers from euro nations said Monday they were "concerned" about the strength of their currency as it hit an all-time high against the U.S. dollar.
The euro purchased as much as $1.5266 in afternoon European trading, topping the previous record of $1.5238 it hit on Friday on speculation of a U.S. interest rate hike this month. The rising euro makes German cars and French champagne and other European Union exports increasingly expensive for the union's major trading partner, the United States.
"In the present circumstances we face, we are concerned about excessive exchange rate moves," Luxembourg Prime Minister Jean-Claude Juncker said after leading monthly talks among the currency zone's 15 nations. "We have never previously said that we were concerned."
French Finance Minister Christine Lagarde said Monday's rapid surge past the "psychological threshold" of $1.50 had "a symbolic character."
This is the closest European finance ministers have come to jointly voicing worries about the euro's rise against the dollar.
Their statement repeated their view that exchange rates were irrational because they are not based on "economic fundamentals" and referred to U.S. Treasury Secretary Henry Paulson's comments that a strong dollar was in America's best interest.
The euro's strength comes as the economy faces mixed signals on how well it is doing in the first three months of this year, EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters.
"We are in a difficult environment with strong uncertainties, with bad news coming from the U.S. economy during the last week," he said. "We know we will not be immune to the situation of the financial markets, to the slowdown in the U.S. economy."
But Europe is still winning some of the gains of a recent growth spurt with unemployment at its lowest-ever point and a strong currency that cuts the cost of the dollar-priced oil that the region imports.
Exchange rate levels and high inflation—at 3.2 percent in both January and February—also pose risks because they could undermine the two main drivers of Europe's recent growth: an export boom and more spending at home.
Almunia said he hoped inflation would start to calm over the next few months and was confident that the euro economy could weather the coming storm.
Juncker was more upbeat saying economic growth was robust enough to deserve finance ministers' confidence—even as consumer confidence tumbles with people spending more on transport fuel, heating oil, vegetables, dairy products and bread.
But the wider effects of the currency's strength lie ahead as some of Europe's largest companies renegotiate the long-term price contracts that have so far shielded them from exchange rate fluctuations.
French-headquartered airplane maker Airbus SA complained that for every 10 euro cents the euro rises, the company loses as much as 1 billion euros, or $1.5 billion. The euro has risen from $1.4726 on Jan. 2, an increase of more than 5 U.S. cents—or in Airbus' case $758.4 million.
Automaker BMW AG announced job cuts last week and warned it could not rule out more if the euro continues to surge. Volkswagen AG said it is thinking of building a new plant in the U.S. to avoid exchange rate trouble. Porsche AG and Daimler AG are looking to low-wage India and China.
All 27 European Union nations will meet Tuesday for talks about the economy focusing on recent price rises, tax evasion and a joint EU plan on how to deal with investments from sovereign wealth funds.
Ministers will also talk about financial stability before a March 13- 14 summit of EU leaders that will chart out what Europe can do to limit future shocks to financial systems in the wake of the U.S. subprime crisis that has crippled credit since last summer.
Let the EU eat...uh....Airbuses.
Water seeking its own level!
Since we keep getting bashed by the Euro’s, perhaps it is a good thing that the costs have gone up.
We don’t really have to by their autos, their wine, and many of the items they tout as being the best. We’ll just buy American and let them import our our items.
The Japanese have done this for many years. They jus love it when their Yen is at 125Y to the dollar. Did you see how their market dropped and they scrambled at 104Y to the dollar?
“We’ll just buy American and let them import our our items.”
****
Or, we could just buy American that’s imported from China...
But it makes Manhattan real estate very cheap for them, and they are snatching it up big time, leading to the highest prices ever last quarter, as the rest of the nation slumped.
“Finance ministers from euro nations said Monday they were “concerned” about the strength of their currency as it hit an all-time high against the U.S. dollar.”
Why we don’t mind. The a weak dollar is good theory is bye bye.
Would they like to start making our Navy’s ships as well?
Contact Northrup-Grumman and a desperate Gov.
That part of your statement is a bit overwrought. Out of 150 real estate submarkets in the USA, 77 are currently experiencing price declines and 73 are experiencing price appreciation.
Fundamentally, the US economy is in much better shape than the EU; I still believe the dollar/EU imbalance is being purposefully manipulated to collapse the EU.
Note that we get most of our raw imports from Asia or Canada, both of whom have seen a ~10% to 15% “increase” over the last two years, relative to the dollar. Yet we’ve collapsed by 50% relative to the Euro, our biggest export market...
So our prices of production haven’t really increased, but the cost of our products have dropped in the EU. This puts a tremendous strain on their exports - Germany. In fact, German exports are contracting at a huge rate because they are so expensive! And that smacks the EU HARD.
I give it a few more years before Germany or the Netherlands pulls out of the EU, in terms of the Euro. And after that, it all collapses, leaving the US once again as the pre-eminent economic force in the world.
Heck, Belgium STILL doesn’t have a government after a year... The old factions within Europe are rising again, nationalism is coming back, and you’ll see increased resistance and desire to break out from the EU. Especially when the Euro is killing their economies...
The devaluation of the dollar may even make imports from China a luxury.
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