Europe Economy

Euro Strength Reduces ECB's Surplus

The European Central Bank's surplus fell to 286 million euros ($439 million) last year from 1.37 billion euros in 2006, because of the euro's strength, the bank said on Thursday.

"The reduction is mainly due to the appreciation of the euro against the U.S. dollar and, to a lesser extent, the Japanese yen," the ECB said in a statement.

An amount equivalent to the surplus was set aside as a provision against risks on foreign exchange rate, interest rates and gold prices, leaving the bank's net profit zero, the ECB said.

"The appreciation of the euro vis-à-vis the U.S. dollar and, to a lesser extent, the Japanese yen resulted in writedowns of some 2.5 billion euros in the euro value of the ECB's holdings of assets denominated in these currencies," the bank's statement said.

The ECB's income comes primarily from investment earnings on its holding of foreign reserve assets and its paid-up capital of 4.1 billion euros, and from interest income on its 8 percent share of the euro banknotes in circulation.

The bank earned total net interest income of 2.421 billion euros from all sources, up from 1.972 billion in 2006.