In his first speech to the European Parliament in Strasbourg, French President Francois Hollande insisted that the Eurozone defend an exchange rate policy that protects the single currency from irrational price swings.

"Europe [...] is leaving the euro vulnerable to irrational movements in one direction or the other," said Hollande.

"A monetary zone must have an exchange rate policy or else it ends up subjected to an exchange rate that does not match the true state of its economy."

The remarks raise the question of whether Hollande would support the implementation of exchange rate targets.

Economists are concerned that a strong euro in relation to other countries makes exports too expensive for Eurozone members. Lower demand for European goods and services would in turn hurt wider economic growth.

LS

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