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EU leaders urged international banks to help calm markets by revealing recent losses, wrapping up two days of talks that come to a close Friday with a report showing inflation in the euro area hit a new high.
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The srength of the euro is a topic of increasing concern to EU leaders and was a “serious issue” at the summit.
Yearly inflation in the 15 nations that share the euro hit a revised 3.3 percent last month, the EU statistical agency said Friday — setting a new record as prices for oil and food surged.
The dollar’s extended slump was central to the discussions.
Just as Slovenian Prime Minister Janez Jansa called the euro’s strength a a “serious issue,” the euro hit a new high against the U.S. dollar, peaking at $1.5652.
A more expensive euro makes German cars and French wines tougher to sell to the EU’s biggest trade partner, the U.S. A strong euro, however, could ease inflation by cutting the import bill for dollar-priced oil.
The dollar has declined on pessimism about the U.S. economy, which has fed expectations that the Federal Reserve will continue to lower interest rates to jump-start the economy.
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EU leaders insisted in a draft declaration that the fundamentals of the economy remain strong. But the main lever to curb soaring inflation and runaway exchange rates — interest rates — lies outside their hands, and in the control of the fiercely independent central banks.
EU leaders urged member nations to hold off measures such as fuel taxes that would take more money out of shoppers’ pockets as they shell out more for basics.
The leaders plan to issue a statement expressing concern about “fragile” financial markets with credit tight and banks reluctant to disclose losses from complex investments in U.S. mortgage-backed securities. Those securities began to unravel rapidly last summer.
Banks worldwide have written off more than $150 billion in the past half-year, including large fourth-quarter write-offs by major European banks like UBS and Credit Suisse.
Yet Standard & Poor’s Ratings Services said Thursday it estimates writedowns of subprime asset-backed securities could reach $285 billion globally, up from its previous projection of $265 billion.
The statement from the EU will urge banks to provide “prompt and full disclosure of exposures to distressed assets.”
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