Letter: Euro preparations

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The Independent Culture
Sir: Blaming April's record trade deficit, and particularly the sharp drop in exports to the EU, on the "strong" pound is fair enough ("UK trade deficit hits worst level on record", 27 May), except that the real culprit is the weakness of the fledgling euro.

Insofar as that weakness has largely been due to temporary factors such as Oskar Lafontaine, Kosovo and the inexperience of the European Central Bank, it can in due course be expected to right itself without the intervention of others, the Monetary Policy Committee included.

This all the more because, while circus artists can ride two horses and a dog can be trained to walk on its hind legs, monetary policy-makers cannot, without courting disaster, target inflation and the exchange rate simultaneously. Since price stability is the prime prerequisite of sustained, permanently positive economic growth, they should target inflation.


London N3