Euro is about to plunge EU economy back into crisis, fear top policymakers

The currency has rapidly strengthened and hit multi-year highs against the dollar and the pound in recent weeks.

Germany’s exports are now suffering, as higher costs dampen demand from overseas markets.

And it’s feared a hit to the eurozone’s largest economy could throw the entire bloc off course.

The stronger euro also pushes inflation down which, at 1.5 per cent, is still below the ECB’s two per cent target.

Markets have pushed up the euro amid expectations policymakers will soon phase out the economy’s extensive and controversial money-printing programme.

The ECB currently injects €60billion into the eurozone every month, in a bid to raise growth and drive inflation up.

Now policymakers are raising the alarm the euro’s strength could undo the work of the Quantitative Easing bond-buying programme.

The scheme is supposed to finish at the end of the year, but it now looks as though the ECB is reluctant to take away the economy support.

Markets are expecting an update at the ECB’s next meeting on September 7.

But sources are now desperately trying to downplay expectations.

One reportedly said: “The exchange rate has become a bigger issue.

“It is now less favourable for an exit [to money-printing] and a stronger argument for a muddle-through option.”

Another person added: “The huge appreciation in the euro is already causing monetary tightening and is equivalent to an increase in interest rates.”

ECB head Mario Draghi has previously said that the programme will continue until there is proof that inflation is on course.

The euro dropped amid the latest reports of ECB concerns.