Schroeder presses European Central Bank on euro-dollar exchange rate


  • Business
  • Friday, 11 Jul 2003

BERLIN (AP) - German Chancellor Gerhard Schroeder suggested in an interview published Friday that the European Central Bank should do more to weaken the euro against the U.S. dollar, a call that followed the bank's decision to leave interest rates unchanged. 

"I assume the intelligent people in the leadership of the ECB discuss the question every day of whether they have done enough in the context of the euro-dollar exchange rate to maintain the competitiveness of exports from Europe,'' Schroeder was quoted as saying in the Financial Times. 

The euro hit an all-time high of US$1.19 in May, recovering from a slump that once saw it drop to 82 U.S. cents. While the rally has helped restore some luster to the shared currency, it has made European exports more expensive just as exporters are being looked to as leaders of an economic recovery. 

ECB officials have been relaxed in their reaction to the euro's strength, showing no signs of intervening to push it down - particularly now that the 12-nation currency has dropped back to about US$1.13. 

Many economists believe the fall has reduced the chances of the ECB cutting interest rates again after it reduced them to 2 percent on June 6. 

The bank could possibly weaken the euro by cutting interest rates again - higher interest rates in Europe than in the United States are one factor pushing up the euro. 

Theoretically, it could sell euros on currency markets - highly unlikely at current levels, economists say. 

ECB President Wim Duisenberg argues interest rates are already low enough, and said Thursday part of Europe's weakness "can be linked to a lack of ambition in the areas of fiscal and structural reform to improve conditions for investment and employment.'' 

Schroeder is currently trying to push through limited labor-market and welfare-state reforms aimed at boosting Germany's economy, Europe's biggest, which contracted in the first quarter. - AP


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