Leaders of the European Union, meeting in Brussels said on Friday, March 14, 2008 that the volatility and erratic swings in the foreign exchange rates will negatively impact economic growth. In a written communiqué, they said, “in the present circumstance, we are concerned about the excessive exchange rate moves.” According to Jean-Claude Juncker, Prime Minister of Luxemburg, this is the first time that the leaders of the European Union have issued such a communiqué on foreign exchange fluctuations. French President, Nicholas Sarkozy and British Prime Minister, Gordon Brown, also expressed their concerns about the volatility in the exchange rates.
The liquidity crisis, resulted from the sub-prime lending activities in the United States, is the root cause of the extreme volatility in the financial markets. On Friday, stocks in the United States fell sharply, after it was announced that Bear Stearns was another victim of the liquidity crisis.
By mid-day in London on Friday, the Euro surged to 1.5688 against the U.S. Dollar after the release of more bad news about the U.S. economy.