The men who run the euro single currency are so 'worried' by the weakness of the dollar that they are seeking an alliance with China to rein in Washington, their top man has said.
'We spent quite a long time discussing exchange rates, it's a problem which has us worried,' Luxembourg Prime Minister and Eurogroup chief Jean-Claude Juncker said after a meeting of finance ministers last night.
Juncker was speaking alongside European Central Bank chief Jean-Claude Trichet and EU economic and monetary affairs commissioner Joaquin Almunia, after weeks of growing tension about the rising strength of the euro.
The dollar again traded lower against the euro last night, the euro rising to $1.4958 from $1.4903 late in New York on Friday. Analysts and traders have said the value of the euro could yet regain its all-time high of $1.60.
Trichet said it was the trio's common position that the 'excessive volatility of currency movements had clearly 'negative implications for the economic and financial stability' of Europe's economy as a whole.
Fearing the issue could derail a tentative export-driven recovery, Juncker said he, Trichet and Almunia would now take their case on the dangers of currency market fluctuations to the other side of the globe.
'It is foreseen that the three of us will travel to China before the end of this year and discuss the exchange rate policy,' he said, without giving any detail as to what message they would carry.
Experts have warned that spluttering economic recovery in Europe is endangered by a dive in the value of the dollar which analysts say the US wants in order to lower debts to China and boost exports.
There is concern in Europe that Washington is allowing the dollar to fall seeking a short-term boost to its own exports and a long-term reduction in the value of government and private debts, much of which is held in China.
The European Commission reckons that appreciation in euro value against the dollar of 10% in real terms would see exports fall by around 2.5% within two years.
