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Euro Hits 4 Year High - 2003-05-09


Economists are closely watching the rise of the euro, which has hit four-year highs against the dollar. The euro is now worth nearly $1.15.

As the euro rises, European exports are becoming more expensive, limiting sales for European industry. As industry slows, there are fewer jobs. Unemployment in the 12 nations that use the euro hit a three-year high in March, at 8.7 percent.

So far, analysts say, damage to the European economy from the high euro is limited, but that could change.

"Europe really is not in a good position to take it," said Daniel Gros, director of the Center for European Policy Studies in Brussels. "It will certainly create additional problems. If it goes on much further, then Europe risks serious economic difficulties."

Mr. Gros says the serious danger level would start around when the euro equals $1.25, which he believes could occur this year. If things really get out of hand, he says, the rate could hit $1.50, but he says that is not likely in the near future.

While the strong euro is affecting major economies like the United States and Japan, the impact in the developing world is limited, because European goods do not find a big market there, according to Mr. Gros.

"It is today not very important, because Europe mainly exports highly sophisticated manufacturing goods, and the markets for these goods you find in other rich countries," said Mr. Gros. "So the less-developed world is not that important a market for the EU."

Economists say the strong euro is less a reflection of European strength, than of American economic problems. Mr. Gros says the euro is high because the dollar has fallen sharply.

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