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Markets under-rating the euro - Trichet

PARIS: Bank of France chief Jean-Claude Trichet said on Sunday financial markets were under-rating the euro and the euro zone's economic strengths.

Trichet, hammering out his constant line in reply to a question about the euro's recent slippage versus the yen, said European Central Bank policy enshrined an unswerving commitment to monetary stability, solidity and credibility.

"A strong economy goes hand-in-hand with a strong currency," he told Europe 1 radio. "Markets will realise...they are underestimating."

"The euro has a significant margin of appreciation," he added.

Trichet, who is also a member of the ECB's governing council which sets interest rates for the 11-nation euro currency zone, said France's economy was expanding strongly and was predicted to have grown by 0.8 percent in the first quarter of this year.

Growth in the euro zone's second largest economy was 2.7 percent in 1999 after a dip in the early part of last year due to the knock-on effect of the preceding year's financial crises in Asia.

It grew 3.4 percent in 1998 and is expected to return to that level or more in 2000, with private sector economists widely predicting gross domestic product will beat the government's forecast rise of 3.4 to 3.8 percent.

Trichet, who consistently calls for efforts to prevent "rigidities" in the labour market, said it was even more vital now to ensure that hiring of qualified labour was not made more difficult by rules and regulations.

"Let's be flexible on overtime so that growth will not be hindered," said Trichet, who has recently said difficulties in finding qualified labour in certain sectors could ultimately cause inflationary pressures due to the resulting rise in wages. -Reuters