Meant to Unite Europe, Euro Instead Divides --- Germans Blame Italians; U.K. Says Participation Would Be Leap of Faith --- By Wall Street Journal staff reporters Christopher Rhoads and Dagmar Aalund in Frankfurt and Michael R. Sesit in London
The euro was meant to bring Europe closer together. These days, it seems to be doing the opposite.</br></br>The common currency, already caught in a major slide, is becoming the cause of heated political finger-pointing. The Germans blame the Italians for lack of budgetary backbone. The Dutch head of the European Central Bank faults the Germans for failing to kick-start their economy. And currency traders are voting with their feet.</br></br>The big question is whether the euro is going through normal growing pains -- or facing a major crisis. The answer may be a bit of both. Yesterday, the euro hit another low, trading for as little $1.0326 on uncertainty over Kosovo and prospects for higher U.S. interest rates. In late New York trading, the euro traded for $1.0358.</br></br>"There was extensive debate before European economic and monetary union that it would be difficult to have a single currency for this region," says Thomas Mayer, European economist with Goldman, Sachs & Co. in Frankfurt. "This has just all become clear much earlier than expected," he said.</br></br>Wim Duisenberg, head of the European Central Bank, yesterday played down concerns about the euro's drop, stressing the euro-zone's favorable inflation outlook. "The euro is a currency firmly based on internal price stability and therefore has a clear potential for a stronger external value," Mr. Duisenberg said at a news conference after the ECB governing council's regular meeting. The ECB held interest rates steady, as expected.