PUNCHING UP

ECB pressed to cut rates as euro soars (Tony Major, May 6 2003, Financial Times)

The European Central Bank on Tuesday came under mounting pressure to cut interest rates as the euro surged to four-year highs and shrinking eurozone output continued to hold back recovery.

The euro charged to $1.1358, up more than 8 per cent on the dollar since the beginning of the year, spreading alarm among exporters and prompting warnings that the soaring single currency could dent eurozone growth prospects.

The euro's rise since December has wiped out the benefits of the ECB's quarter-point cut in rates in March as exporters face increasing competition for their goods.

This would seem to be a calculated decision to drive up the euro at any cost, in order to be able to contrast it with the dollar and pretend that Europe is still significant. The problem is that in driving the European economy even deeper into recession, or even depression, you sooner or later defeat your own purpose. Posted by Orrin Judd at May 7, 2003 9:16 AM