Euro embarrassing, says Deutsche chief

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The Independent Online
ONE OF Europe's most senior bankers yesterday described the slump in the euro since its 1 January launch as "embarrassing", dealing a fresh blow to the beleaguered currency

Rolf Breuer, chairman of Deutsche Bank, said the 14 per cent fall in the euro against the dollar had damaged the reputation of the currency and the monetary system. And he revived speculation that the European Central Bank could intervene to prop up the currency, saying the ECB was "prepared" for such a move.

But Mr Breuer said the fall in the euro had been good for the 11 Euroland economies as it had boosted their export industries. His comments came as a survey showed that hostility among the British public to joining the euro has risen to its highest level for two years.

On a visit to London to open the bank's new trading floors, Mr Breuer denied the euro had been a disaster. But he went on: "It is more the embarrassment factor for a young currency." He said he was concerned by the harm caused to the euro, but said it was "reputational not operational damage".

Asked whether the ECB would be forced to intervene, he said: "Not really. Presently there is no reason but they are prepared. It [the euro's fall] is a very good event for European business because exports have a chance to increase dramatically."

On the foreign exchange markets, the euro made further gains above $1.02 yesterday in the wake of hints by Wim Duisenberg, ECB President, that rate rises could be in prospect.

Sentiment towards the currency was boosted by comments by Finnish Finance Minister Sauli Niinisto that he saw potential for European growth and a stronger euro. Incoming European Monetary Affairs Commissioner Pedro Solbes said that eurobond issues showed the launch of the single currency had been "a great success".

The euro rose to $1.0222 from $1.0216 in late European trading on Thursday. But the negative reporting of the euro's slide has hardened opposition to Britain's entry into the system, according to a MORI poll for investment bank Salomon Smith Barney.

The proportion favouring entry is down to 27 per cent from 31 per cent in May, with those opposed rising to 58 per cent from 53 per cent. Even if the Government were to swing its efforts behind a campaign for entry, the balance against joining is 23 per cent compared with 14 per cent in May.

The swing was especially marked among the AB and C1 social groups, which Salomons said put a question mark over Labour's pro-euro stance in the run-up to a general election.

Michael Saunders, Salomons euro analyst, said the next six to nine months would be crucial.

"If public opinion remains clearly anti-EMU then - perhaps around mid- 2000 - Labour will allow the EMU timetable to slip," he said.