The currency's climb has hurt exports, making European products more expensive Pity the poor euro, for it is not easy being a new currency. In its few short years as the single legal tender of 12 European nations, the euro has failed to win the hearts of the millions of Germans, Italians, the French and others using it. At best, it has engendered benign indifference, except when the European currency has either been too weak or too strong against the US dollar. At the moment, the latter is the case and as the euro continues to climb, the euro zone's business leaders, politicians and central bankers are beginning to get a bad case of vertigo. That is because the European Union is likely to have chalked up its worst annual growth rate in years in 2003, and many officials fear an ascendant euro could strangle the beginnings of a fragile economic recovery. With the dollar sliding in value in recent months, American goods are becoming cheaper on world markets and European products are becoming more expensive. 'It's certainly put a brake on exports,' said Anton Borner, president of the BGA German foreign trade association. 'It presents a formidable challenge because the euro has risen so quickly.' After its introduction in 1999, the euro promptly plummeted in value against the greenback to a record low of 84 US cents a year later. But the currency has since made a ferocious recovery, gaining about 20 per cent against the greenback last year alone. Although comments this week from EU finance ministers and the European Central Bank briefly checked its climb, the euro appears to have resumed its march towards US$1.30. It closed at $1.2656 on Friday. Businesses in Germany are feeling particularly squeamish, since Europe's largest economy - which shrank last year by 0.1 per cent - is heavily dependent on the export sector and the US is the country's most important buyer of goods outside the euro zone. Although most large companies hedge against currency risks on the financial markets, the swift rise of the euro caught much of the Germany business community unprepared. Both engineering giant Siemens and software maker SAP said on Thursday that the strong euro had hurt their sales. Consequently, those firms doing a fair chunk of their business in America are now thinking about how they can lessen their foreign exchange pain. For example, Europe's biggest carmaker Volkswagen said it was considering an increase in production at its North American factories to help alleviate the effects of the sliding dollar. 'The problems occurring due to the weak American currency are at the very top of my agenda,' VW chief executive Bernd Pischetsrieder said in German car magazine Automobilwoche. Most experts still expect German goods sales abroad to increase this year, but with America buying 10 per cent of the country's total exports, industry is also looking for other markets. China, with its voracious appetite for manufactured and industrial goods, heads the list. Volker Treier, an economist at the Association of German Chambers of Industry and Commerce, said demand from Asia and China would remain strong this year despite the fact the yuan was pegged to the dollar. 'That's our future market there,' he said, citing how VW sold more cars in China than in Germany for the first time last year. Dr Treier also said there was little Europe's policymakers could do to halt the euro's rise and the dollar would probably bounce back as America's growth rate outstripped Europe's. However, that did not prevent the EU's political and business elites from dusting off their best verbal weapons at the World Economic Forum in Davos, Switzerland, last week. German Deputy Finance Minister Caio Koch-Weser fired the first volley on Thursday, saying he did not rule out joint action by G7 nations to halt the euro. But even if the euro's ascent cannot be stymied, there is at least one benefit in having such a strong currency: Europeans can have a cheap summer holiday in the US. 'Yeah, I'd already thought of loading up on dollars,' Dr Treier said. 'I'm getting married this year and I considered going to America with my wife.'