The euro, Europe's single currency, dropped below 98 cents today, its lowest level yet. Since its inception more than a year ago at a value of $1.17, the euro has fallen more than 16 percent.
That decline provoked virtually no concern here at the annual meeting of the rich and powerful, also known as the World Economic Forum. This Alpine village is bristling with finance ministers, corporate chieftains and talking-head policy experts, and none seemed to think that the new money of 11 European nations was a flop.
Two American experts called for central-bank intervention to push up the euro, but Europeans were sanguine. Some analysts noted that its lower value makes European exports cheaper. "It's a psychological problem," said Ernst Welteke, president of the Bundesbank, the German central bank.
[Across the globe, the Japanese yen weakened in New York trading to 107.13 per dollar from 105.11 per dollar, its weakest point since mid-October. A weaker yen makes Japanese products less expensive in the United States, which could help dampen U.S. inflation. However, that also could encourage more imports into the United States at a time that the U.S. trade deficit is already at a record level.]
Even those here who think the euro is too low still consider it a big success.
"The euro is one of the most significant developments in the history of the international monetary system in the last 50 years," said Robert Mundell, the Columbia University economist who last year won the Nobel Prize in part for the work he did three decades ago establishing the theoretical basis for currency union.
Mundell called for the European Central Bank to intervene in currency markets to turn the euro's course upward, in part because falling currencies can touch off higher inflation.
So did Fred Bergsten, director of the Institute for International Economics, who thought that with the right policies the euro could reach $1.25. "I submit that today the euro is hugely undervalued, irrationally so, and is probably near a turning point that will induce it to rise in the next few years," he said.
The euro replaced the national currencies of 11 countries--Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain--on Jan. 4, 1999, in every way but cash. The currencies of the participating nations have been locked together and trade on international financial markets as one. Cash will arrive in 2002.
The idea was to give Europe a strong presence on the international economic stage, as well as to enhance trade between euro nations, and many here said today that in that way, the euro has succeeded.
"Eleven countries have given up their currencies for a higher form of governance. . . . We have a world where we have two super-currencies. This is a currency other countries want to adopt," said Albert Bressand, managing director of the French think tank Promethee.
Not all EU nations tie their currency to the euro. Britain, Prime Minister Tony Blair told attendees here today, will join later. He didn't mention that his plan faces a deeply hostile population. When the euro first fell to equal a dollar, London investment bankers held "parity parties" in the City financial center.
Staff writer John M. Berry in Washington contributed to this report.