(2004/C 84 E/0172)

WRITTEN QUESTION E-4029/03

by Juan Naranjo Escobar (PPE-DE) to the Commission

(12 January 2004)

Subject:   Euro-dollar exchange rate

The rise of the euro against the dollar is reaching levels which threaten the recent timid resumption of economic growth in the EU. The 6 % fall in German exports registered from September to October 2003 is seen by analysts as a clear consequence of the euro's appreciation.

Some experts think the ECB may be obliged to reduce its rates if the European currency goes on rising. The Commission, in its autumn forecasts, had to scale back its growth forecast for the Community economy, to 0,8 % for 2003 and 2 % for 2004.

Does the Commission believe the euro will continue to appreciate over the coming months? Does it believe that a level exists for the euro-dollar exchange rate which would reflect the real bases of both EU and US economies? Are the Commission's most recent economic growth forecasts for the next two years still valid?

Answer given by Mr Solbes Mira on behalf of the Commission

(11 February 2004)

The Commission believes that a stable exchange rate is in Europe's interest. The Commission also shares the concerns of the euro-area Finance Ministers and the President of the ECB concerning excessive exchange rate movements (as expressed in the Eurogroup statement of 19 January 2004).

The euro has undergone an appreciation of around 25 per cent against the dollar since the start of 2003. However, the euro-area real effective exchange rate — which is what matters for competitiveness — has only appreciated by around 8 per cent since then (when deflated by nominal unit labour costs). The real effective exchange rate is based on the evolution of the euro against a basket of currencies, weighted according to their importance in the external trade of the euro area. It also takes into account differences in inflation rates.

Both survey data and hard indicators confirm that the Commission services Autumn 2003 forecast is still on track. Indeed, the euro-area real effective exchange rate has only appreciated by around 4½ per cent since the forecast was published. It is also worth noting that the latest available (January 2004) private-sector Consensus forecast for GDP growth in the euro area in 2004 is the same as that given in the Commission Services forecast — 1,8 %.

The Commission does not have an official position concerning whether or not the euro will continue to appreciate over the coming months. Similarly, the Commission does not have an official position concerning what exchange rate of the euro against the dollar would best reflect the economic fundamentals of the United States and euro-area economies.