- The Washington Times - Wednesday, April 16, 2008

BRUSSELS (AP) — Most European exporters are not yet feeling the pain of the strong euro, an EU official said yesterday — even as aircraft maker Airbus, which sells its planes in dollars, called the level “unbearable.”

Luxembourg Prime Minister Jean-Claude Juncker, who leads monthly economy talks among the 15 nations that use the common currency, said he did not see the high euro hurting the European economy “for the time being.”

The euro reached a record $1.5912 on Thursday, which makes German cars and French champagne more expensive for American customers or forces exporters to squeeze their margins. It also has an upside for Europe because it helps ease inflation by reducing the cost of dollar-priced oil imports.

“For the time being, we don’t have a too huge impact on the real economy,” Mr. Juncker said, but he refused to say what level would hurt European exporters. “The export sector is developing quite well. The moment will come where the exchange-rate level will start to cause serious harm to the European economy.”

Record sales figures from Europe’s biggest automaker Volkswagen AG show the trend. The company said yesterday that it saw its best-ever quarterly car sales in the first three months of this year, despite the dampening effect of the exchange rate.

Sales to the U.S. fell slightly, although that was more than offset by surging demand in China and Brazil.

Trade figures from last year show that euro nations, which include France and Germany, saw sales to the U.S. and Japan slip slightly last year — but increased exports to most other major trading partners last year.

Companies that rely on dollar-denominated sales — such as Airbus — are feeling considerably more pain.

The strong euro is a “sword of Damocles” starting to fall on the company, said Louis Gallois, chief executive officer of Airbus’ parent European Aeronautic Defence & Space Co.

“We are at levels which are becoming unbearable,” he said, and warned that it could force the company to shift more of its costs into dollars by moving production outside of the euro area and making acquisitions in dollar-based countries.


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