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Fed chief sees euro success
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November 20, 1998: 1:26 p.m. ET
Greenspan says currency's credibility linked to European Central Bank
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NEW YORK (CNNfn) - Federal Reserve Chairman Alan Greenspan said Friday he is confident the euro, a uniform currency being introduced in Europe, will be "impressively successful."
But the man responsible for setting U.S. interest rates also told the banking congress in Frankfurt, Germany, that the European Central Bank will play a pivotal role in ensuring the euro's credibility.
"The issue of the competitiveness of the euro as an international currency will depend crucially on the credibility of the ECB," he said.
Greenspan also shot down the concept of target zones for global exchange rates, a plan now being debated.
He said intervention to stabilize currency levels in such a system would simply be unworkable.
"It is a desirable goal," he said. "It's just not feasible. The presumption that we can create exchange rate target zones is an illusion."
Japan, the euro zone and the United States would require huge sums of money to manage currency levels in such a system -- and governments could balk at such huge payments, he added.
On Tuesday, the Fed cut interest rates for the third time this year, citing "unusual strains" in financial markets.
As expected, the Federal Open Market Committee cut the federal funds rate by a quarter of a point to 4.75 percent, the lowest rate since August 1994.
The federal funds rate is an overnight bank lending rate that is a benchmark for other short-term interest rates. 
--from staff and wire reports
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Federal Reserve Board
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