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EU officials defend strong euro
FRANKFURT, Germany -- Two top-ranking European Union officials have thrown their support behind a strong single currency, saying the euro's recent advance is good for the economy and criticising governments for any rise in consumer prices. On the eve the first anniversary of the introduction of euro notes and coins, EU Economic Affairs Commissioner Pedro Solbes said a strong euro -- which touched three-year peaks against the dollar on Tuesday -- was the right policy and "we will continue in the same direction.'' The euros reached $1.05 in early London trading -- its highest level since November 1999. Investors have been pulling out of the U.S. currency and looking for safe havens to park their money due to fears over a possible American-led attack on Iraq and concerns about North Korea's plans for nuclear weapons. (Full story) Solbes told El Pais newspaper that the strength of the euro would eventually mean lower prices for imports and reduced inflation in the 12-nation euro zone. "If we are capable of implementing the right policies, it [a strong euro] should mean we are more competitive in the broader macroeconomic arena,'' he said. "There is a tendency to defend a weak currency because of the short term benefits for exporters. But this is a mistake in the medium- and long-term.'' The euro was adopted as a common currency on January 1, 1999 and began trading on global foreign exchange markets on the same day. However, euro coins and notes were only introduced on January 1, 2002. Many Europeans have since complained that retailers took advantage of the switchover to hike prices, although EU officials maintain that inflation remains relatively low. Still, EC President Romano Prodi said what price rises have occurred were due to a lack of controls by individual governments.
"The euro, which represents the European economy, is therefore a new, big protagonist in the world economy,'' he told Italian daily La Repubblica. "The price increases have been altogether modest... but they should have been avoided because they were completely unjustified,'' Prodi said. "The increases are not attributable to the introduction of the euro, but to the lack of government controls. The euro has not been the cause, but the occasion for illegitimate and surprising behaviour that was not controlled.'' UK still considering euro entryMeanwhile, Solbes fuelled debate over Britain's possible entry in the euro zone, saying: "I hope to see the euro zone expanded before I go in two years time. I would like to see the United Kingdom included, but I am not sure this will happen.'' "It would be good if it [the United Kingdom] entered and the doors are open, but it has to take the decision. I also believe we cannot wait for it without advancing further.'' British Prime Minister Tony Blair has promised to assess five tests on whether joining the single currency is good for Britain by next June and offer the public a referendum if that case is made. But Blair has ruled out a referendum during his current term in government due to obstacles in the path of a "Yes'' vote, the Sun newspaper reported on Tuesday. (Full story)
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