French Economy Minister Christine Lagarde said yesterday that she did not believe the euro’s survival was in danger, after a German clampdown on short-selling triggered a new fall in the currency.
Lagarde said France would not follow Germany’s unilateral ban on the naked short-selling of certain stocks and bonds, and distanced France from German Chancellor Angela Merkel’s warning that the euro was in danger.
“I absolutely do not believe that the euro is in danger,” Lagarde told RTL radio. “The euro is a solid, credible currency that has assured the stability of the eurozone for more than 10 years.”
While Lagarde denied there was any dispute between Paris and Berlin on euro policy, her comments clearly marked her stance as separate from Merkel’s, both in terms of regulatory policy and its presentation.
On Wednesday, Merkel had defended her short-selling ban in stark terms.
“This test is existential and it must be overcome ... if the euro fails, then Europe fails,” she told German lawmakers. “The euro is in danger. If we do not avert this danger then the consequences are incalculable and the consequences for the whole of Europe are also incalculable.”
The euro plunged to its lowest level against the US dollar in four years on Wednesday, before rallying slightly yesterday to about US$1.23.
Lagarde insisted that the fall was no reason for concern, saying that despite current “fears and threats” the euro had been launched in 1999 as equivalent to US$1.16 and had at times traded at less than US$1.
“There’s a margin for fluctuation, but what we see over the long term is the credibility of a currency and the euro is a credible currency,” she said.
Meanwhile, the head of the Eurogroup said yesterday that financial markets were acting irrationally over the eurozone’s debt problems and while he was concerned about the fall in the euro, immediate action was not needed.
Jean-Claude Juncker, chairman of the Eurogroup forum of eurozone finance ministers, said the weakness in the euro, down more than 7 percent against the US dollar in the past month alone, was likely because of fears that economic growth in the 16 countries that share the currency would slow, but markets were acting irrationally.
Juncker, speaking to reporters after meeting Japanese Finance Minister Naoto Kan in Tokyo, said he did not see the need to take immediate action on the euro’s rapid plunge, but said central banks were in close contact.
“Monetary authorities are monitoring closely exchange rate developments and they best know what to do. I’m concerned because the rapidness of the fall in the euro is impressive. I’m not concerned as far as the current exchange rate is concerned.”
The instability is worrying China though, which called for an international response.
“The European sovereign debt crisis is a challenge not just for the countries that are party to it, such as Greece, in fact, it is a challenge to the stability of the entire international financial market,” Chinese Assistant Finance Minister Zhu Guangyao (朱光耀) said. “It concerns the recovery of the entire international economy and so it demands a common response from the international community.”
Zhu told a news conference the eurozone sovereign debt crisis showed the need for countries to control their debt levels and maintaining the stability of major reserve currencies was “very important.”
Worries over the eurozone’s debt crisis hammered Asian stocks for the second straight day to their lowest in more than eight months.
Tokyo hit its lowest level since Feb. 15, shedding 1.54 percent, or 156.53 points, to 10,030.31. Sydney dived to its lowest since Aug. 21 last year, tumbling 1.61 percent, or 70.6 points, to 4,316.5, while Hong Kong’s benchmark Hang Seng Index dropped 33.15 points to 19,545.83.
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