The outgoing Bundesbank president has urged competition between the tax systems of European countries, saying a lack of such dynamism rather than the euro was monetary union's problem.

In an interview with yesterday's International Herald Tribune, Mr Hans Tietmeyer said Europe's economic and monetary union had introduced a brand of economic dynamism that challenged traditional welfare systems.

He also rejected any formal harmonisation of European tax systems. "There has to be competition between tax systems just as between social systems among nations . . . Welfare systems must be competitive. They are increasingly coming into competition," said Mr Tietmeyer, who is due to retire at the end of the month.

"The euro is not the problem," he said of the currency that has lost 10.5 per cent of its value since its January arrival. "But the problem is more the ability to innovate and the lack of competitive dynamic," he said.