BRUSSELS: European Commission (EU) President Romano Prodi and French Prime Minister Jean-Pierre Raffarin said last Wednesday they were concerned the euro's recent sharp rise against the dollar will harm the European economy.

At a joint news conference after talks at EU headquarters, Prodi said they had discussed currencies, and that he fully shared Raffarin's call for leading world finance ministers to seek ways to make the exchange rate more compatible with economic reality.

"I share the statement of the prime minister on the euro completely, because such strong variations of the euro are not positive for our economy," Prodi said.

"We hope there will be a more stable monetary perspective in future."

Said Raffarin: "We both want the parities to be as close as possible to economic reality. The rapidity of these movements on currency markets is worrying because they are diverging from economic reality."

The French leader called for the EU's budget deficit rules to be adapted in future to encourage greater investment in research and development in Europe.

He cited France's bid to host a global nuclear fusion reactor project as an example.

He also said the Stability and Growth Pact should take account in future of longer-term structural reforms, such as France's efforts to make its pension and health insurance systems more sustainable.

Raffarin avoided direct criticism of the EU executive's decision to appeal to the European Court of Justice to annul a finance ministers' decision to allow France and Germany to escape disciplinary action over their deficits.

But he said France believed the decision last November was legitimate, and he was relaxed about the court's verdict.

His comments came a day after the commission decided to mount a legal challenge to the ministers' decision to suspend EU budget rules for the euro zone's two biggest economies, which have repeatedly broken the bloc's deficit limits.

Many EU governments have criticized the commission's decision, and French Labour Minister Francois Fillon earlier joined the chorus.

However, Spain and the Netherlands have backed Brussels.

Agencies via Xinhua

(Business Weekly 01/20/2004 page2)