Euro-zone finance ministers have said there is "no need to panic" over the euro's recent rise in value against the dollar and the yen. They have also pledged to use the recent economic upswing in Europe to pay off national debt and balance their budgets by 2010, writes Jamie Smythin Berlin

At an informal meeting of finance ministers in Berlin yesterday, Eurogroup chairman and Luxembourg prime minister Jean-Claude Juncker dismissed the threat posed to European growth by the rising value of the euro.

"There is no need to panic," he said. "The euro's foreign exchange rate hasn't moved upward brutally, but slowly . . . Markets must know that they are well advised if they engage in one-way bets."

European Central Bank president Jean-Claude Trichet supported Mr Juncker's warning to investors on speculating.

"Exchange markets should be aware there are two-way risks in any bet," he said, repeating a warning made at a G7 meeting in March in Essen. "Excessive volatility and disorderly movements in exchange rates are undesirable for growth . . . We believe the Japanese economy is on a sustainable recovery path and that exchange rates should reflect these fundamentals."

Following the comments and a rally on the US stock markets, the dollar recovered some of the ground it had lost this week. After hitting a session high of $1.3637, the euro slipped back to $1.2594, about 0.1 per cent down on the day.

Minister for Finance Brian Cowen said the rising euro affected the Republic more than other EU economies due to the higher proportion of exports to the US. But he downplayed the threat posed by the rising euro, saying the US economy was strong.

The finance ministers agreed to use the strong economic performance in Europe to pay off national debt and balance their budgets in an effort to bolster the EU's revised budget rules.

The Stability and Growth Pact was designed to limit government borrowing, but breaches of the 3 per cent of gross domestic product (GDP) deficit ceiling by Germany and France forced a revision of the rules in 2005.

"Taking advantage of the favourable cyclical conditions, most euro area members would achieve their medium-term objectives in 2008 or 2009 and all of them should aim for 2010 at the latest," the group said in a statement. This means that all euro-zone members should reduce their debt to between minus 1 per cent and plus 1 per cent of GDP.