The European Central Bank – which is set to raise interest rates again this week – has ignored calls to do something about the strength of the euro. ECB President Jean-Claude Trichet has not responded to statements from some economists and French politicians, including Prime Minister Dominique de Villepin, to stop its climb.
The euro is close to a two-year high compared with the dollar and this week hit a record against the Japanese yen. The ECB, which has focused on controlling inflation, has – in the last year – moved rates to the current 3.25%. The Federal Reserve has left the US rate at 5.25% since June.
The politicians are worried about the effect of a strong euro on exports, but EU Monetary Affairs Commissioner Joaquin Almunia said on Monday that there is no reason for the French to be “alarmist’‘ about the currency’s gains. Two years ago, the euro rose to $1.3667 and Trichet did express concern then. He said it was “not welcome” but at that time the euro zone’s economy was much weaker.