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
ebooksA celebration of British elections
News
Tottenham legend Jimmy Greaves has defended fans use of the word 'Yid'
people
Life and Style
tech
Arts and Entertainment
Kanye West, performing in New York last week, has been the subject of controversy as rock's traditional headline slot at Glastonbury is lost once again
music
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living