- A political storm has broken out in Germany over reports
that the government may be distancing itself from the European single currency.
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- Stern magazine said that Finance Minister Hans Eichel
had been present at a meeting where the "collapse" of monetary
union was discussed.
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- The government is planning to blame the euro for Germany's
economic weakness, the magazine added.
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- The report was dismissed by both the ministry and Germany's
central bank.
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- But it comes at a sensitive time for Germany, as the
country gears up for a possible early general election following regional
poll defeats for Chancellor Gerhard Schroeder's ruling Social Democrats
(SPD).
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- The euro dipped sharply when the report came out on Wednesday
morning, hitting an eight-month low of $1.2218 by 1600 GMT.
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- Struggling economy
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- Public dissatisfaction with the government's handling
of the economy is one of the greatest challenges facing Chancellor Schroeder.
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- His ruling SPD/Green coalition is widely expected to
lose a parliamentary vote of confidence, due to be held by 1 July, which
would trigger a general election.
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- The euro is seen as a potential source of political conflict.
According to Stern, some 56% of Germans want to go back to the deutschmark.
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- And dissatisfaction with the single currency has proved
a potent topic in the campaign ahead of this week's Dutch referendum on
the European constitution.
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- 'Absurd'
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- Responding to the Stern report, the finance ministry
and the Bundesbank described talk of the euro's demise as absurd.
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- "Finance Minister Eichel and Bundesbank President
Weber see the euro as a unique success story and an important step in securing
the future of Europe," a Bundesbank spokesman said.
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- Both men said they had not taken part in discussions
during the meeting on the problems facing monetary union.
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- "The mere fact that it has been talked about means
that it is a big deal," said Jeremy Hodges, head of foreign exchange
sales at Lloyds TSB Financial Markets.
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- "I see no reason whatsoever to go against the euro
move."
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- © BBC MMV
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- http://news.bbc.co.uk/2/hi/business/4599681.stm
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