Euro's slide leaves European Central Bank chief unperturbed

The president of the European Central Bank, Mr Wim Duisen berg, said yesterday he was unconcerned by the euro's slide against the dollar and predicted it would take Britain years to adopt the single currency.

The euro dropped below parity with the dollar on Thursday, and fell further to 0.9756 on Friday in London trading. It was introduced in January 1999 at $1.16675.

"I'm not disappointed. On the contrary, I must say the performance of the euro gives me reason to be pretty satisfied," Mr Duisenberg told BBC television.

"Our main purpose is to deliver a climate of stable prices, and that is what we have done," he said.

"That the exchange rate has fallen somewhat is of course of much less significance now, for the euro area in total, than it was in the past for individual countries. We honestly believe that the euro has a potential to increase in value, vis-a-vis the outside world, but those processes take time," he said.

Britain opted out of joining the euro, and Mr Duisenberg said it would now take London years to join the 11-nation euro zone.

"That process has taken us a long time. It will take Britain some time, to say the least. If ever the UK were to decide to join, you are talking about a moment in time which is years from today," he said.

"I keep believing it would be in the interest of the UK to join this huge currency area. But it's up to the people of Britain to come to that same conclusion," Mr Duisenberg said.

On the question of interest rates, he said a rise was possible within a few months, as a result of higher energy costs.

"We do expect, mainly due to higher oil prices, that inflation will creep up a little bit more in the coming months. If that led to higher labour costs, then we might have to react with our monetary policy," Mr Duisenberg said.

As the fledgling European currency went into a virtual free-fall late last week, plummeting below parity with the dollar, two camps emerged, with one urging stronger action and the other insisting the currency did not need central bank help.

The interventionist camp, led by stability-minded Germans, warned at the weekend that repeating the ECB's mantra that the euro had potential to appreciate as the euro-zone's economy was set to improve significantly this year was not enough.

With unusual frankness, Bundesbank council member Mr Klaus-Dieter Kuhbacher on Saturday went as far as suggesting the ECB's governing council would raise interest rates at its next meeting on Thursday.

Mr Kuhbacher did not argue the move was necessary to halt the euro's decline but expected a majority of central bankers from strong-growth countries on the council to opt for an increase in order to quell imported inflation further down the line.

Yet, expectations in financial markets have been growing over the past week that the ECB may bring its long-awaited rate rise by 25 to 50 basis points forward to ensure inflation-free growth but also give the euro a much-needed boost.