Europe and US head for clash over policy for euro

EUROPEAN FINANCE ministers and the US administration are poised for a clash over sluggish growth in Europe and the weakness of the euro.

US officials are expected to use Monday's meeting of Group of Seven ministers and central bankers to urge their European counterparts to boost growth and to share with the US the burden of soaking up imports from Asia. The weak euro has become a symbol in the US of European economic inaction.

The International Monetary Fund added its pressure yesterday, urging the European Central Bank to be more open about its policies and to respond to low inflation. Although praising the ECB's "sensible and pragmatic" approach to monetary policy, the IMF agreed that the weakness of the euro since its 1 January launch reflected doubts about growth in the euro area.

"It was particularly important at the early stages of the ECB, in view of uncertainties for the outlook in the euro area and the global economy, that the public understand and have confidence in the monetary framework," the IMF said.

The new currency remains close to its low against the US dollar, hovering just above $1.06 yesterday. It has lost about 10 per cent of its value against the dollar since the new year. Trading was quiet yesterday ahead of Monday's G7 meeting. Finance ministers arrive in Washington tomorrow in the wake of the weekend Nato summit.

Financial market analysts predict that the euro will remain weak until economic fundamentals on the Continent show signs of improvement.

Philippe d'Arvisenet, chief economist at BNP in Paris, said: "The Americans might put on some pressure, but the currency is just a reflection of economic conditions." Slow growth in Europe compared to faster US growth would keep the euro weak for a few months, he said. The Balkan war also weighs on the euro, analysts said.

However, the suspicion in the US is that Europe is deliberately practising towards its new currency the policy of benign neglect that has served the dollar and US exporters so well. The issue has become sensitive because of the Asian crisis and subsequent explosion of the US trade deficit. Protectionist sentiment among US producers is rampant.

New figures for the UK economy yesterday confirmed that growth remained sluggish in the first quarter of this year. However, the 0.1 per cent rise in GDP in January to March, to a level 0.7 per cent higher than a year earlier, is widely expected to mark the low point of the business cycle.

According to preliminary figures from the Office for National Statistics, manufacturing output fell during the quarter, but more slowly than in the final quarter of 1998. The figures for manufacturing output in the first quarter are likely to show a fall of around half the fourth quarter's 1.3 per cent decline.

But if the worst is over for manufacturing, growth in services slowed to its lowest since the trough of the recession in mid-1992. Services output rose 0.4 per cent in the first quarter, taking the year-on-year growth down to 2.3 per cent from 2.7 per cent in the fourth quarter.

Since mid-1992, services output has climbed by 26.7 per cent, compared to a rise of about 8 per cent for manufacturing output.

Outlook, page 19

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones