Serbia's acceptance of the international peace plan for Kosova gave the euro some short-lived respite yesterday but further uncertainty reigned between finance ministers and central bankers on who should talk and when.
The euro gained briefly on foot of the Yugoslav developments but the predicted surge did not materialise and it was unable to sustain any gains above $1.04. It closed at $1.0356 but fell in late European trading to $1.0328, having declined as low as $1.0305.
Analysts said the currency was unable to revive definitively because it was weighed down by fundamental weaknesses in euro-zone economies as well as differences between Europe's finance ministers and central bankers.
EU leaders will seek to address the issue at their summit in Cologne today with a statement underlining their commitment to a strong euro. They will attempt to calm fears that following last week's decision to allow Italy to increase its budget deficit, Europe is about to soften the terms of the Stability and Growth Pact.
The German Chancellor, Mr Gerhard Schroder, said that Europe's leaders were committed to maintaining strict budgetary discipline while boosting economic growth. "We will send a clear message from Cologne that stability should be combined with growth. The stability of money is a condition for growth and growth is a condition for having a sustainably stable currency," he said.
Finance ministers - meeting at the end of the currency's worst week since its launch five months ago - also discussed an agreement yesterday whereby they would remain silent on the euro in future, leaving all comment on it to the European Central Bank (ECB).
"Too much is being said about the euro," Germany's Finance Minister, Mr Hans Eichel, warned.
But the Dutch Finance Minister, Mr Gerrit Zalm, said the ministers were unable to speak with a harmonious voice and would have to strive for a common position.
The central bankers also continued to contradict one another. Bundesbank president Mr Hans Tietmeyer, speaking in Cambridge, said the euro had great potential and the slide in its value was not good news.
However, the Belgian central banker, Mr Guy Quaden, advanced the opposite opinion. In response to a question on the decline of the currency he said: "My answer to the question is that it [the rate] is not greatly important."
Mr Colin Hunt, chief economist at Goodbody Stockbrokers, said it was quite clear the euro was now a leaderless currency. The markets needed to see central bank governors singing from the same hymn sheet, he added. "There are too many conflicting messages coming out of Frankfurt. The euro is also being impaired because the ECB has not yet established its credibility in the markets."
