A weak euro could make life easier for Europe's exporters

On Friday, the euro fell below $1.20 for the first time in 10 months.

Later on Thursday European Central Bank president Jean-Claude Trichet restated his commitment to fighting inflation.

The ECB has kept rates unchanged at 2% for two years, despite frequent changes in the US and UK, and complaints about eurozone stagnation are building.

Foremost among the criticisms is the suggestion that the anti-inflation bias at the ECB is exacerbating the continent's slowdown.

In Germany and Italy, politicians have speculated - sometimes in private, but sometimes in public - that joining the 12-nation eurozone could have been a mistake.

By 2000 GMT the euro had recovered slightly to stand at $1.21 having earlier dipped to $1.1983 - a level last seen in August 2003.

Uncompetitive

The dissatisfaction with the state of Europe's economies has intensified following the rejection by French and Dutch voters of the European Union's constitution.

Commentators have suggested that the "No" vote in both countries was partly due to worries about low growth and its impact on jobs.

The eurozone is predicted to grow just 1.2% this year, after expanding 1.7% in 2004.

Jean-Claude Trichet has staunchly defended the ECB's position

Industrial output is flagging in France, while several countries may see their economies shrink this year, and others including Italy are teetering on the brink of recession.

The strength of the euro, critics say, means European exports are uncompetitive.

Some economists now forecast an about-face at the ECB, which until now has insisted that 2% is the right level of interest rate for the eurozone.

Investment bank SG, for instance, is expecting the rate to fall to 1.5% by the end of the year.

Although the US Federal Reserve is continuing to raise rates, the UK's Bank of England is increasingly seen as likely to lower its borrowing costs.