The euro's 10 per cent fall against the dollar since January is dividing Europe's central bankers and politicians into those who think the slide has gone far enough and those who say it is not a problem.

Economists, too, have had difficulty making up their minds.

Is the euro's fall exactly what the doctor would have ordered for a euro zone struggling to maintain economic growth and exports, or should a new currency be robust enough to establish its credibility early on?

Paradoxically, the answer to both questions can be yes.

In retrospect, the politicians were too quick off the mark in early January when they celebrated the euro's short-lived rise to $1.1877 as proof of the currency's virility.

They would have done better to remember that the dollar was always likely to recover, given the US economy's strength and the downturn in Germany, the largest euro zone economy.

Analysts at HSBC Economics in London, however, note that the euro has not actually fallen as much as one might imagine.

Its present exchange rate is roughly equal to that of the synthetic euro one year ago.

In other words, the average value of the 11 currencies which make up the euro - adjusted for their weight in the new currency - are roughly the same as they were one year ago.

Moreover, its decline in trade-weighted terms has been less dramatic than its headline fall against the dollar and sterling. This is because the euro remains strong against the currencies of central and eastern Europe, prominently represented in the trade-weighted index.

Hence, the European Central Bank's president, Mr Wim Duisenberg, had good reason on April 19th to say the euro's level did not worry him.

However, financial markets took his remarks as a green light to sell the euro, which proceeded to touch a record low on four out of five successive trading days, coming close to $1.0550.

In what looked like an effort to dispel gathering scepticism about the euro, especially in the US, two of Mr Duisenberg's colleagues on the ECB's executive board promptly warned the markets that they should not write off the euro as a lost cause. Moreover, Mr Duisenberg was prominent at last week's IMF meeting - saying that if the decline of the euro on the international markets was to go on, he would be concerned.

Obviously, he is learning that his every word is parsed by the markets, which are quite capable of seeing meanings which are not there. He said the recent decline must be seen as following the "europhoria" which lifted currencies between September last year and its January arrival.

Mr Duisenberg sees reasons why the currency should strengthen, rather than fall further.

Mr John Llewellyn, global chief economist at Lehman Brothers, says that uncertainty over euro zone economic policy since March has knocked about two cents off the euro and the Kosovo war has taken off another two cents or so.

However, if European governments pursue more credible economic policies and the Kosovo war ends within a few weeks, the euro will finish the year at $1.12, he says. The ECB hardly needs reminding that these are big "ifs".