Euro collapse report ‘absurd’: Bundesbank chief

1 June 2005

BERLIN – The president of Germany’s central Bundesbank on Wednesday rejected as “absurd” a report saying he had taken part in a meeting at which the possible collapse of the euro was discussed.

In a statement, Bundesbank chief Axel Weber, said he would never take part “in such an absurd discussion”.

“The euro is a success story,” said Weber in the statement.

Germany’s finance ministry also denied the Stern magazine report which said Weber and finance minister Hans Eichel were also blaming the euro for the country’s weak economy.

Steffan Giffeler, a finance ministry spokesman, said Eichel saw no danger of a euro collapse and underlined that he had no knowledge of the report cited by Stern as its source.

Stern magazine based the story on what it says are secret minutes it obtained of a meeting last week between Eichel and Weber.

Berlin’s finance ministry, according to the report, says Germany has lost what used to be its interest rate advantage under the old Deutsche mark.

Introduction of the euro in January 2002, brought “enormous advantages” to formerly high interest countries like Greece, Ireland, Spain and Portugal, said the German finance ministry, according to Stern.

“Alone for Spain the effect makes up for 3.1 percent of gross domestic product (GDP),” said the document quoted by Stern.

But for Germany the euro has meant that interest rates are too high given mainly weak German economic growth ever since it replaced the D-mark.

“The German disadvantage accounts for (minus) 1.4 percent of GDP,” said the report quoted by Stern.

Eichel and Weber also discussed scenarios under which the euro, which is used by 12 of the European Union’s 25 countries, could possibly fail and force its members to revert back to their old, national currencies, said Stern.

This danger, said Stern, was set out in the report as a possible result of eurozone economies diverging and the differences becoming too big to hold the single currency bloc together.

In Frankfurt, the euro sank to its lowest value against the dollar since 13 October 2004 and traded at USD 1.226 on Wednesday afternoon before being pegged by the European Central Bank at USD 1.2228.

“Rumours about talks in the finance ministry over an end to the currency union have again put pressure on the euro’s value,” said Folker Hellmeyer of the Bremer Landesbank.

An opinion poll conducted for Stern showed 56 percent of Germans want to ditch the euro and bring back the D-mark.

DPA

Subject: German news