Germany's finance minister appeared on Monday to dash prospects of a common response by euro zone nations to the single European currency's rising exchange rate, declaring "I love a strong euro."
Peer Steinbrueck made clear his sharp difference with France and others demanding a weaker euro when he arrived for a meeting of euro zone finance ministers due to seek a joint approach at next weekend's meeting of the G7 industrialised powers.
"I prefer a strong euro," he told reporters. Laughing, he added: "I love cash and a strong euro."
France has led demands for international action to tame the euro and boost the dollar, yen and Chinese yuan to ease life for European exporters who compete with U.S. and Asian companies.
The talks will test how broadly they hold the view that the exchange rate is getting out of hand and how determined they are to press the case in the G7 club of industrial powers, where the United States and Japan are far from rushing to the rescue.
"Monday evening is the big moment," one French official said ahead of the meeting in Luxembourg, which begins shortly and involves European Central Bank boss Jean-Claude Trichet.
"If we can get it right -- with the Europeans united on the diagnosis, the communicating and the need for action -- Trichet will have a much stronger hand to go to Washington with."
The three biggest euro zone economies, Germany, France and Italy, are part of the G7, whose finance ministers and central bankers meet later this month in Washington.
France and Italy have complained loudly recently about the euro's strength, but Germany, the world's biggest exporter, has sent mixed signals, making its stand key at Monday's talks.
The Nub of the Problem
The euro, which recently hit record highs versus the dollar and yen, has risen more than 20% versus the U.S. currency since it was launched in January 1999 and has gained 25% against the yen.
While a rising euro can help to limit the cost of oil, which is priced in dollars, and so inflation, it makes it harder for exporters to compete in world markets where China's state-controlled currency also sets a benchmark.
Though China has allowed its currency to rise slightly versus the dollar over the past two years, it has let it weaken by just as much against the euro, compounding a belief that the euro zone is carrying the can for others.
Spanish Finance Minister Pedro Solbes said exchange rates should reflect economic fundamentals, and the burden must be fairly shared among G7 nations.
Europe is not alone in complaining. Australian Treasurer Peter Costello said on Monday his country's currency, at a 23-year high, was causing exporters "a lot of problems."
International Monetary Fund boss Rodrigo Rato said in newspaper interviews published on Monday the U.S. dollar was undervalued but also urged greater flexibility in Beijing's currency policy.
The Luxembourg talks will be chaired by Jean-Claude Juncker, head of the Eurogroup, a forum where the finance ministers and ECB chief Trichet liaise regularly on economic matters.
They are the last chance for ministers to deliberate together before a G7 meeting also involving the United States, Japan, Britain and Canada.
European officials have admitted in private that Washington is no more willing now than previously to lend Europe a hand.
It may even be happy to see the dollar weaken for the sake of its exports when the rest of the U.S. economy is struggling with a housing downturn and mortgage crisis which has triggered a global credit squeeze.
Without G7 consensus or at least U.S. support, there is no risk of central banks intervening in the exchange rate market to try to impose their will.
Without that, the driving force behind exchange rates is the perceived direction of interest rates, which militate for continued euro strength as the ECB still looks more reluctant to reduce interest rates than the U.S. Federal Reserve.
Trichet, speaking in Brussels on Monday, gave nothing away and referred to a news conference last week where he reiterated that excessive currency volatility was very counterproductive.
French President Nicolas Sarkozy is not relenting however in his demand for action and hopes concerns over the global credit crunch and the euro's latest surge will galvanise the euro zone around Paris's position.
One of Sarkozy's chief advisers, Henri Guaino, said in an French newespaper interview published on Monday that an ECB rate cut would help.
"I have noted that in Germany there is also a debate, as elsewhere in Europe, with German industrialists beginning to find the euro too dear," he said.