Economic superpowers in joint operation to save failing euro

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The Independent Online

The world's richest economies launched a dramatic and unexpected bid yesterday to prevent the plunging value of the euro from triggering a global financial crisis.

The world's richest economies launched a dramatic and unexpected bid yesterday to prevent the plunging value of the euro from triggering a global financial crisis.

The European Central Bank (ECB) - supported by the major economic superpowers, including Britain - intervened in the financial markets to buy euros for the first time. The move was also the first internationally coordinated intervention in any major currency on this scale for five years and instantly took the flagging euro up 5 per cent to $0.90 from an all-time low. It closed up two cents at $0.88.

European governments said the action underlined a new consensus among the world's central banks that the currency is undervalued.

But sources in Frankfurt conceded that next Thursday's Danish referendum on membership of the euro may have been a factor, albeit a marginal one, in the timing of the rescue mission.

In a statement which took the money markets by surprise, the ECB said: "The monetary authorities of the United States and Japan joined with the ECB in concerted intervention ... because of their shared concern about the potential implications of recent movements in the euro exchange rate for the world economy."

A government spokesman played down the UK's role in the intervention. "The Chancellor has made it clear in the past that were we asked to participate as part of a concerted intervention then we would," he said.

The scale of the intervention was not disclosed but between them the leading nations have about £100bn in reserves at their disposal. The British Government has £29.6bn.

Economists said the role of the US was crucial. Alison Cottrell, ofPaineWebber, said: "The eagle has landed and drawn a line in the sand." Neil MacKinnon, at Merrill Lynch, added: "The markets take on the US Treasury at their peril."

UK export businesses hit by the strength of sterling applauded it, but the intervention was condemned by eurosceptics as a vote of no-confidence.

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