Eurozone Finance Ministers & IMF claim the Euro is Overvalued

Eurozone finance ministers and the International Monetary Fund see the euro currency as too highly priced, Eurogroup chief Jean-Claude Juncker said Tuesday.

Speaking after a meeting of the 16 countries that use the single currency, also attended by the IMF's Europe director Marek Belka, Juncker said they were all agreed that the "euro is overvalued."

"We are in agreement with him when he says that the euro is overvalued and that a certain number of adjustments are desirable," he said, underlining that the unnatural strength of the euro was particularly the case when compared to China's yuan.

"We see it as abnormal that a fast-growing economy (China) devalues its currency in relation to a currency zone where growth performance is far less positive," he said, citing forecasts for eight percent annual growth in Chinese gross domestic product.

The European Commission is forecasting eurozone growth of 0.7 percent in 2010 and 1.5 percent in 2011.

On Tuesday, the euro moved higher against the dollar -- to which the yuan maintains a de facto peg -- as investor appetite for risk returned on the back of positive data from China, the United States and Europe and as fears eased of a Dubai default.

The single European currency in late-day trade was at 1.5094 dollars after 1.5005 dollars late Monday in New York.

According to French President Nicolas Sarkozy, at that level, "how do you expect us to sell planes to the United States?"

Speaking earlier in the day, Sarkozy said today's "multipolar world" should have a "multipolar monetary system."

Juncker met with Chinese premier Wen Jiabao on Sunday, along with European Central Bank chief Jean-Claude Trichet and outgoing European Union economic and monetary affairs commissioner Joaquin Almunia.

Luxembourg premier Juncker, set to be voted in for a new two-and-a-half mandate as eurogroup leader in January, said they were "not looking for an abrupt change in Chinese monetary policy."

Rather, he said, they explained to Jiabao, joined by the Chinese central bank chief and his finance minister, that Europe wanted to see a "gradual" realignment.

"We were of the opinion that an appreciation of the yuan compared to the euro was desirable to reduce the global disequilibrium we observe," Juncker added.

He said Chinese citizens would enjoy greater purchasing power if Beijing took back "control over its monetary policy."

He added: "Our Chinese friends don't see it the same way, that's hardly a surprise but we were determined to articulate our point of view to them."

Wen Jiabao on Monday said international pressure over China's currency policy was "unfair" after Trichet told reporters that the Europeans encouraged Beijing to take "a more flexible policy."

The yuan's exchange rate is one of the thorniest trade issues between China and the European Union.

When Beijing officials talk about keeping the yuan "stable," it typically refers to maintaining its current value.

The Chinese currency has been effectively pegged to the US dollar since mid-2008, and Europe fears the euro's resultant rise against the yuan will hurt EU exports to China and slow the continent's economic recovery.

H1N1: The Hidden or Concealed Pandemic

H1N1 swine flu continues to roam the planet. In the US, cases are thought to be in the hundreds of thousands. In Japan, hundreds of teenagers have caught it, despite no obvious connections with Mexico or the US.

Yet in Europe, health authorities are not testing widely for it and are prescribing drugs as though they could still contain it. And in Geneva, health ministers have fought this week to keep the World Health Organization from following its own rules and calling this a pandemic.

There has been a phenomenal mismatch between quite sensible rules about how to declare a flu pandemic, and equally sensible rules about how to respond. The mismatch was wholly predictable, yet somehow no one saw this coming.

The WHO rules for declaring different degrees of flu pandemic threat are based on epidemiology (how the virus is spreading) for good reasons. This is because any new flu virus to which most of the world has little immunity, and which spreads well enough person-to-person to escape its continent of origin, is very likely to go global, and to cause more sickness and death than flu usually does. That is the definition of a flu pandemic.

The virus's ability to spread is what matters. H5N1 bird flu has travelled across Eurasia, mainly in birds, but it hasn't spread readily in people, so it isn't a pandemic.

The Mexican swine flu H1N1, however, has. When it spread across the Americas, the WHO followed its rules and declared it a level 5 situation; one down from a pandemic. When it starts spreading outside the Americas, through "community transmission" - meaning it crops up generally, not just in people who have visited Mexico or New York recently or their contacts - that means it's got a foothold globally.

A flu that can do that is very unlikely to stop there. The WHO rules make that a full-blown level 6 pandemic.

And frankly, that is starting to happen. As I write, the number of confirmed cases in Japan (and that's just people sick enough to see a doctor and get tested) has jumped by 35 in the past 24 hours, to nearly 300, mostly due to that perennial vector of flu, the gregarious teenager. The main cluster started without any known links to the Americas.

In Europe, countries are deliberately not testing cases that could be community acquired, almost as if someone doesn't want to trigger - 'LEVEL 6'

In fact, Britain, Japan and other countries spent this past week pleading with the WHO not to go to level 6 yet, at least while the virus is still causing mostly mild disease. WHO boss Margaret Chan has now agreed to make the call when she sees "more signals coming from the virus itself or the spread of the disease, including severity."

The problem is, countries have pandemic plans that, rightly, prepare for the worst. Until recently we were worried about H5N1 (we still are) and there seemed a good chance that if it went pandemic, it might start off severe, necessitating major controls from the start.