Exchange rates dominate euro talks

Euro ministers will kick off their first meeting of the year discussing the recent record rise of the single currency in preparation for the meeting of G7 leaders in February. 

Europe's council of economic and finance ministers, Ecofin, will also take stock of the recent decision by the European Commission to take member states to court over their decision to suspend the EU Stability and Growth Pact.

A spokesman for the Irish presidency, which will chair EU finance meetings until the end of June, admitted "the problems of the strong euro are evident to everyone" and said the issue would be at the "forefront" of Monday's talks.

A public statement has not been confirmed.

"It's not yet clear whether there will be an official statement or not after the meeting", was all a spokesman would say at the commission's lunchtime briefing, while other sources at the Irish presidency claimed it was unlikely.

But ministers are likely to establish an EU position before the meeting of the world's seven richest nations on February 6, as much of the euro's gain is due to the falling dollar which is being punished over the US' huge current account deficit.

Finance chiefs have started to voice publicly their growing concern over the euro's level against the dollar, which rose to just under .29 early last week.

French finance minister Francis Mer said on January 10 he hoped the G7 meeting would "clarify and stabilise things" and in a joint conference with German economy minister Wolfgang Clement both ministers said the euro's level was beginning to pose a problem.

Last Wednesday commission president Romano Prodi told journalists he hoped for a "more stable monetary perspective".

And the euro dipped to .251 on Thursday after the chief economist of the European Central Bank Otmar Issing said the ECB is "not indifferent" to currency fluctuations.

While the commission has previously supported a "strong and stable currency", a higher euro may threaten exports and could slow the EU's economic recovery.

Also at the meeting, economic commissioner Pedro Solbes will present the commission's decision to take legal action against Ecofin's suspension of the EU Stability and Growth Pact in November.

Finance chiefs decided not to move towards sanctions against France and Germany for breaching a fiscal rules limiting budget deficits to three per cent of GDP rule, a move which the commission claims is illegal.

Some officials fear the decision to go to court could undermine confidence in the EU as well as sour relations between the commission and national capitals.

But a UK official on Monday denied there was any bad feeling, claiming political differences did not preclude good relations between the institutions.

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