In playing down the impact of the euro's surge on currency markets, European Central Bank chief Jean-Claude Trichet is reverting to type in a career marked by indifference to politicians' anguish about foreign-exchange levels.
As the euro surged to new highs against the dollar last week, prompting a renewed bout of concern about the impact on European exporters, the former governor of the Bank of France was careful to strike a balanced tone.
After the ECB Thursday resisted calls from some politicians for an interest-rate cut to clip the euro's wings, Trichet confined himself to saying that the bank "does not like excessive volatility or excessive turbulence" in exchange rates.
He acknowledged that the strong euro was having "a negative impact on the price competitiveness of eurozone exporters."
But thus far, "this should be partly compensated for by the ongoing expansion of global demand," Trichet said.
The ECB chief's refusal to panic in the face of the runaway euro is of a piece with his long-held stance that, confronted with an unstable and unpredictable financial system, policymakers are best off coupling a robust currency with economies flexible enough to cope with periodic shocks.
When he headed the French central bank in the 1990s, Trichet earned the moniker "Ayatollah of the strong franc" in resisting angry attempts by President Jacques Chirac to cajole the governor into cutting interest rates as a means of boosting growth.
The ECB governor said exchange rates were one of a whole set of factors that he would take into account in setting borrowing costs for the 12-nation eurozone, dismissing calls for a knee-jerk cut in rates to curb the euro.
"We're not the prisoner of an equation or a set of equations," he said.
But Trichet's fatalistic approach to the ups and downs of the currency markets -- which for much of the euro's five-year life have been furiously marking the currency down -- has not met with universal approval.
Belgian Prime Minister Guy Verhofstadt last week became the first EU leader openly to urge the ECB to cut its key rates in order to check the euro's rise.
German Economy and Labor Minister Wolfgang Clement also called for ECB action, arguing "the euro's strength and the dollar's weakness are the biggest risk to growth at the moment."
For one European monetary expert, the ECB chief's approach smacks of complacency.
Under this approach, "the onus for external shocks and the burden of structural adjustment rests entirely with companies and economic agents," the expert said on condition of anonymity.
Economists have echoed concern expressed notably by EU Trade Commissioner Pascal Lamy about the impact of the euro's surge on Europe's economic recovery.
They say that a 10-percent rise in the euro's weighted exchange rate translates into a dent on growth of between 0.5 and 1.0 percentage points, which the eurozone can ill afford after three years of weak or no growth.
"Foreign trade has remained the engine of growth [in the EU] thanks to formidable global demand," said Goldman Sachs economist Nicolas Sobczak, expressing concern that the surging euro could seriously weaken that trade.
"At US$1.45, that would be a disaster," he said.
On Friday the euro was changing hands at a record high of more than US$1.28.
But for Bank of America economist Lorenzo Codogno, "it is not surprising to hear that Trichet is unimpressed by the substantial appreciation in the euro against the dollar."
"It would take several months of above [US$]1.30-levels and some impact on confidence to really force an interest rate cut by the ECB," he said.
For Trichet, the ECB has done its job by holding its headline interest rate steady at a low and "appropriate" level of 2.0 percent, where it has been since June.
What's lacking, he says, is confidence in the eurozone economy. And that can only come from sounder policies by governments, including greater respect for the tattered fiscal rules that are supposed to underpin the euro.
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