Germany's top financial policymakers ruled out failure of European monetary union on Wednesday, dismissing as "absurd" talk that the single currency's survival could be at risk. The euro dipped sharply after German news weekly Stern reported that break up of monetary union was discussed at a meeting which German Finance Minister Hans Eichel and Bundesbank President Axel Weber attended last week with market economists.
A source who participated in the meeting told Reuters the issue had been raised by a private sector economist, but that the senior German officials had not participated in that part of the discussion nor made any comment.
The Bundesbank issued a statement saying Eichel and Weber consider the euro currency "a unique success story and an important step in securing the future of Europe".
"Weber rules out failure of monetary union. He will not participate in such an absurd discussion," said Bundesbank spokesman Wolfgang Moerke in a statement.
Eichel sees no danger of a failure and will not take part in an "absurd" discussion sparked by a media report, a German Finance Ministry spokesman said.
But even the slightest scent of any high-level political concern over the future of Economic and Monetary Union (EMU), however remote failure might be, hit a currency already struggling after France firmly rejected the European Union constitution last weekend.
The euro plumbed $1.2227 against the dollar by midday European trade, its lowest level in more than seven months and down over 3 cents since the French vote on Sunday.
The currency now braces for another blow on Wednesday as Dutch voters also are expected to reject the constitution and support is starting to wane even in EU-stalwart Luxembourg.
"The mood is so negative, although it's not a credible outcome for the next couple of years that the EMU Monetary Union) would break up," said Carsten Fritsch, currency strategist at Commerzbank in Frankfurt.
The Bundesbank and finance minister meeting, one of a regular series of round table discussions between German officials and private sector economists, was held to discuss growth differentials, the participant in the meeting told Reuters.
Economists and EU policymakers increasingly are worried that the growth and inflation gap is widening between vibrant economies of Ireland and Spain and laggards Italy and Germany.
Slow-growth countries are suffering rising unemployment and political discontent, which some politicians and economists fear could lead to a fraying of popular commitment to EU and to the European Central Bank.
"In the course of discussion it came up that this could eventually lead to (EMU failure)," the source said. "It was discussed as a serious option, (one person) saw this as a serious option although a very low probability event." "It came up, but it was not the main topic of discussion, the issue was (growth) divergence."
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