Euro falls in spite of upbeat economic forecasts

The Euro tumbled ominously close to parity with the dollar yesterday, despite the upbeat outlook for the 11 member economies. It fell as low as $1.0195, close to the $1.0104 all-time low since the launch of the single currency nearly a year ago.

The Euro tumbled ominously close to parity with the dollar yesterday, despite the upbeat outlook for the 11 member economies. It fell as low as $1.0195, close to the $1.0104 all-time low since the launch of the single currency nearly a year ago.

It also weakened against the yen and sterling, the result of positive news about economic prospects in Japan and the UK.

The performance of the euro contrasts with the mounting economic strength of the region. The eurozone had already begun a solid recovery and was set to bounce back strongly next year, Brussels said yesterday, as it revised up its official growth predictions for the next two years.

Europe's latest economic survey predicted a big jump in real gross domestic product next year in the 11-nation zone from 2.1 per cent in 1999 to 2.9 per cent in both of the next two years. Growth throughout the whole EU will be slightly higher at 3 per cent in 2000 and 2001, the European Commission said.

It also boosted Greece's campaign for entry into economic and monetary union in 2001, predicting that Greek inflation, the main barrier to its membership at the euro's launch, will more than halve from 4.5 per cent in 1998 to 1.9 per cent both next year and in 2001.

The Commission argued that its optimistic assessment of European performance was "testimony to the strength of the EU economy" being driven by the improved international conditions and domestic demand. But the financial markets shrugged off the forecasts in the wake of the recent ECB interest rate increase and institutional selling.