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EU backs off euro bolster
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June 4, 1999: 7:39 a.m. ET
Summit's final statement omits reference to lack of concern about currency's slide
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LONDON (CNNfn) - In a surprise about-face, European Union leaders concluding a two-day summit meeting in Germany on Friday dropped wording from a final communiqué that sought to downplay their concern over the euro's steady five-month slide.
The revision was apparently made after the EU leaders' efforts to sound upbeat about the embattled single currency failed to brake a fresh decline Friday morning to record low of $1.0275.
The euro is down 12 percent since its launch in January at $1.17. A string of record lows in recent days has provoked a bout of consternation among central bankers across the Continent, who fear an irreparable blow to the euro's credibility if it dips below parity with the U.S. dollar.
The crisis has highlighted some fundamental differences between the bankers and politicians, with the latter implicitly favoring a weak euro for the supposed benefits it brings to European exporters.
A draft document of the summit communiqué, shown to reporters in Cologne, Germany, where the summit was held, contained an assertion that the EU's governing body, the European Council, "is not at all concerned by the current development in the euro's foreign exchange rate."
That phrase, diplomats told Reuters Friday, was apparently ditched in favor of a more vague statement that euro stability will help foster job and economic growth.
The council also scratched a line that read: "The European Council believes that the euro's exchange prospects in the medium and long-term are good."
By early afternoon in Europe, the euro had gained a half-cent, to trade just above $1.03.
As the euro has continued its slide, European Union leaders have sought to avoid any alarmist statements that could give the currency a reason to fall further.
The European Central Bank, for its part, has expressed its commitment to euro stability while turning a deaf ear to sporadic calls for intervention.
EU president-designate Romano Prodi sought on Friday to deflect concerns about the viability of the euro.
"Have you never heard about currency fluctuations?" he asked in an interview on CNNfn's World Business This Morning. "This is the inauguration of a new currency. I didn't expect it to strengthen in a situation of a weak (European) economy."
At another point, Prodi said he believed the euro will strengthen in the future, and that his main focus in the meantime was on European growth.
Many economists blame the euro's weakness on the disparity in growth levels between the United States and Europe.
"This (euro weakness) is only the consequence of an economic situation that is not well defined," Prodi said.
--from staff and wire reports
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