Fears for jobs over rising euro

THOUSANDS of jobs will be lost if the euro continues to maintain its dramatic rise against the dollar, a leading economist warned last night.

Chief economist with Bank of Ireland Group, Dan McLaughlin, issued the warning as the euro edged towards its flotation price against the US dollar of $1.17.

Two years ago the euro was worth only $0.83 and could hit $1.25 in the weeks ahead US analysts said.

From an Irish perspective the growing sterling weakness is a huge concern for Irish firms.

If sterling continues this trend unemployment could shoot up to 6% resulting in the loss of thousands of more jobs in the months ahead as Irish firms’ competitiveness is undermined by a weaker UK currency, he said.

His warnings came as the euro hit a fresh four-year high of $1.15 again yesterday morning, after the European Central Bank held interest rates at current levels.

The euro was trading at just over $1.15, compared with $1.1497 late on Thursday in New York and has slipped back to $1.1462 by yesterday afternoon.

Since the rally began the euro has gained over 7% since mid-April as global investors piled into Euro bonds in preference to under pressure shares or lower interest bearing US bonds. On Thursday, the ECB opted to keep the eurozone’s interest rates unchanged.

That decision in the short term could see the euro rally sustained with one US economist predicting the euro could hit €1.25 before long.

ECB president Wim Duisenberg said on Thursday that an exchange rate of $1.15 would be considered an appropriate level for the euro.

He made his comments following a decision to leave EU interest rates on hold despite an expectation that they would have been cut by at least 0.25% in an attempt to kick-start the eurozone economies

Analysts suggested however, there were other factors conspiring to keep the US currency pushed downwards against its European counterpart.

One of the difficulties for the dollar is still the lack of clear visibility about economic recovery, analysts suggested.

Dr McLaughlin believes the pessimism to be over-done and that most likely the dollar will recover down the line.

“I still think, if you look at factory orders in the states and if you look at business spending, the trend has turned upwards.”

It is not as dramatic as it could be because of the war, but the “green shoots of recovery are there in the US”, he said.

Directive evidence of the recovery is visible in the increase in consumer confidence and the sharp rise of 60% in micro chip prices that have emerged.