McCreevy under fire from banks

FINANCE Minister Charlie McCreevy had his first clash with financial institutions yesterday as head of the group of European finance ministers.

He was accused of encouraging a rise in the euro against the dollar by not being forceful enough in his statement on the strength of the currency on Monday night.

Mr McCreevy, however, defended himself by saying he had simply repeated the joint statement agreed by the European Central Bank, the euro-zone ministers and the Commission.

He refused to respond to questions on what he would advise exporters, facing an increasingly difficult market due to the strength of the euro, to do.

Despite taking the unexpected step of issuing a statement following Monday nights' meeting of the 12 euro States, the euro began to climb again yesterday against the dollar.

On Monday it had fallen to its lowest against the US currency this month after making record gains of a third against the dollar in the past few months finishing at €1.29 on Friday.

The ministers left it until the third of their four paragraph joint statement to mention the exchange rates, concentrating on the recent signs of strengthened economic activity in the euro area and on the further reforms needed to increase growth potential.

They omitted the word "strong currency" and instead put particular stress on stability and said they were concerned about excessive exchange rate moves.

The result was that the euro rose 1.5% against the yen and more than 1% against the dollar yesterday as investors treated the lack of concrete details from theeurogroup meeting as a green light to buy.

However, analysts noted the policymakers did not discuss contingency plans for tackling any renewed euro volatility and said this, coupled with technical trading influences, lit a rocket under the euro.

"It's technical positioning after the dollar index failed at 88, and there was really nothing new out of the eurogroup meeting we need a stronger definition of excessive volatility and what they are going to do about it," said Trevor Dinmore, currency strategist at Deutsche Bank.

When questioned about the role of his statement in the rise of the euro against the dollar yesterday, Mr McCreevy said: "The Ministers agreed on their statement last night. We do not like excessive volatility.

"The less said the better."

Later Mr McCreevy said that the price of the currency reflects its fundamentals.

"The price of the currency is a matter for the market to determine."

He was supported by the European Commissioner for Economic and Monetary Affairs, Pedro Solbes who said they favoured the stability of the currency.