Leading Article: There is no cause for panic over the weak euro

LANGUAGE IS the key. Who wouldn't rather be strong than weak, up than down, over-valued than under-valued? And so it is with currencies, where economic illiteracy has joined with political bumptiousness to proclaim that the euro's plunge to near-parity with the dollar proves that Britain was right not to have merged its currency with the others in euroland. In fact, as the warnings attached to stockbrokers' advertisements always proclaim, "the value of your investment can go down as well as up", and this can be without prejudice to the long-term health of the company from which you have purchased shares.

It is as foolish directly to relate the movement of currencies to that of issuing countries' economies as it would be to return to the Roman custom of reading the runes from the entrails of sacrificial animals. But this is not to say there are no lessons to be learnt from considering the plight of the euro, which has fallen 16 per cent against the dollar since its launch on 1 January.

If we look at the reasons adduced for this by economic commentators, they point to various factors such as the capital flows out of sluggish eurozone companies to the more economically vibrant US, and investors taking fright at recent market interventions in Germany and France. These include Chancellor Gerhard Schroder's determination to prevent the bankruptcy of one German company and the possible takeover of another, and France's blocking Coca-Cola from buying Orangina from Pernod Ricard. It is also true that low European interest rates provide little incentive for savers.

These short-term considerations provide the kind of market disciplines that keep politicians on the straight and narrow path of prudent policy- making. Not unnaturally, they will writhe in the vice they find themselves in, and hit out at others. Thus, Hans Eichel, Germany's Finance Minister, has blamed Gordon Brown's refusal to countenance a new withholding tax on bonds, for the fall in the euro. This is as convincing as previous British attacks on Germany for not preventing sterling's failure to maintain its value in the ERM.

Meanwhile, chauvinistic Eurosceptics who have been crowing over the euro's falling value are giving a hostage to fortune. What will they say when, as it surely will, the euro bounces back? The Continental economies are forecast to have greater growth than the UK in the next two years. When that growth is reflected by a rise in the euro, and a welcome decline in the relative strength of the pound, we look forward to welcoming today's nay-sayers aboard the bandwagon for Britain's joining the euro.