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BRUSSELS - Euro zone finance ministers played down the risk of economic contagion as further bad news from the US housing sector today sparked a stock market slide on both sides of the Atlantic.
"Why do you always concentrate on the horror scenarios?" German Finance Minister Peer Steinbrueck
asked reporters.
"The European economy is developing strongly and there are many reasons to be optimistic."
Jean-Claude Juncker, chairman of the Brussels talks, said ministers saw no reason to fret overly about recent wobbles in world stock markets, referring to several bouts of nervous selling since a slump on the Shanghai bourse in late February.
"We take the view that this is a normal sort of correction but also feel we have to keep a close eye on developments over coming weeks and months," Juncker told a news conference.
"There is no reason for us to be worried because economic growth in the euro area remains strong in the short and mid-term," he said, adding that the issue would surely be broached at a meeting of the Group of Seven industrial nations in Washington in mid-April.
In Europe, the risk of spillover from US mortgage problems had been overestimated, said Germany's Steinbrueck, adding that he was not worried either by the euro's renewed exchange rate strength versus the dollar and yen.
Ministers from other members of the 13-country euro area also sounded untroubled by, though conscious of, a host of potential problems raised by journalists -- from rising interest rates to oil prices lifted by tension with Iran.
"There are certainly risks in terms of the oil price, the dollar and the US housing market, and we are certainly keeping an eye on those," Dutch Finance Minister Wouter Bos said. "(But) the European economy is growing well, there is no particular reason to complain."
Share markets responded negatively, however, to a government report on Monday that sales of new US homes fell to the lowest rate in almost seven years in February.
US stocks and the dollar declined, pushing European shares down too, while US Treasury bonds rallied. The FTSEurofirst 300 index, which measures the performance of Europe's 300 largest companies, closed down 0.9 per cent.
US crude oil futures hit their highest this year, boosted by renewed tensions over Iran's nuclear programme and capture of British military personnel that Tehran says entered Iranian waters illegally, something London denies.
In Brussels, it was business more or less as usual, however, as ministers seemed determined not to dent confidence in an economic recovery that kicked in in earnest last year.
Steinbrueck and others sounded sanguine on the euro's rise too, despite it trading near rates versus the yen that triggered howls of complaint from them just last month.
Juncker said Europe's message to the Washington G7 would be the same as it was a few weeks ago in Essen, Germany -- when its focus was on the yen more than the dollar.
The euro also gained versus the dollar in recent days. The single currency hovered on Monday near 157 yen and US$1.33.
"We already had a euro above 1.36 (dollars). Why should we be worried now?" Steinbrueck said.
Spain's Pedro Solbes said: "We can manage the situation."
That jars with the stand taken for months by French Finance Minister Thierry Breton, who argues that a euro above US$1.30 is a cause of concern for euro zone exporters.
He declined comment as he entered and left the Brussels talks, a monthly event also attended by European Central Bank chief Jean-Claude Trichet.
The ECB's campaign of interest rate rises over the past year or so is also regarded as a reason for the euro's strength.
Euro zone economic growth is forecast by the European Commission to hit 2.4 per cent this year after 2.7 per cent in 2006, which was the best performance since 2000, just before the dot.com bubble burst.
But with stock markets subject to several bouts of weakness since late February, there is some concern.
In a paper prepared for the Brussels meeting, the Commission estimates that a 10 per cent decline in global equity markets could shave 0.1-0.2 percentage point off euro zone growth.
- REUTERS
