Renewed Strength of EURO Threatens Economy

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Renewed Strength of EURO Threatens Economy

By Matthew Saltmarsh Published: March 20, 2009

PARIS: After a brief respite, the euro is gaining strongly against the currencies of its main trading partners, further threatening the Continent's wilting economy. That is adding to pressure on the European Central Bank to enact radical steps similar to those that are weakening the dollar, the pound and the Swiss franc.

A rising currency typically dampens demand for exports, an important component of growth. That in turn slows production in factories, with ripple effects on related industries and on jobs.

Since the start of the month, the euro has gained about 7.8 percent against the dollar, 4.7 percent against the pound and 3.1 percent against the franc.

Despite falling on Friday, the euro still posted its biggest weekly gain of the year against the dollar. In late trading in New York, it was at about $1.36.

Jean-Michel Six, chief European economist at Standard & Poor's, forecast that the euro would push through $1.60 by the end of September, and also pass the parity level against the pound by then.

"If the euro keeps rising, it will be really grim news for the euro economy, which is already in very bad shape," said Paul de Grauwe, a professor at the Catholic University of Leuven in Belgium.

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