THE DOWNFALL OF THE EURO

Since January 1st, 1999 the Euro has lost 23% in respect of the USA dollar.

Official data revealed that US economy grew by 5.4% in the first quarter of the year, while wages rose by 1.4%. The Dow Jones industrial average dropped by almost 200 points. The markets, however, soon rose once more and the Euro resumed its downfall.

In fact, it fell to quota 0.91 and you now need 2,131 lire for a dollar and a further rise in USA rates is foreseen at the next FED meeting scheduled for May 16.

According to Romano Prodi the Euro is young and needs time to strengthen and stabilize.

The President of the EU Commission believes the present crisis has nothing to do with the political weakness of some countries, among which Italy. He believes it is only due to transitory issues and says that the Euro is "like a child that still has to grow up".

Meanwhile gas and electricity prices have increased. Inflation had recently lowered due, among others, to the decreased gas price but now it is feared that inflation will be on the rise again. The weakness of the Euro will also intensify the pressure on import-export. Import of raw materials paid in dollars will be ever more expensive. Analysts said that official trade data was likely to get worse in coming months.

Despite appeals not to touch rates so as not to slow down economic recovery, the Euro's fall influenced ECB's decision to raise rates by a quarter point from 3.5% to 3.75%. According to traders this was merely a "symbolic' gesture, but it will affect mortgages and the result of an increased cost of money will influence prices in general. According to many analysts this move is insufficient to stop the Euro's fall, but may instead "disturb' European economic recovery.

Traders fear that if the 90 cents to the US Dollar target is breached, the European currency will enter a freefall.