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THE euro is impart to slide further and could be heading for parity with the dollar, analysts assert. The single currency’s weakness and mounting fears over Europe’s regaining prospects could hit growth in Britain.

The euro fell to a 19-month reduced against the dollar of $1.23 on Friday night, amid fears that the stiffness measures countries need to adopt to satisfy the EU authorities and the International Monetary Fund could donation them back into recession. Sterling ended the week up against the euro at €1.18, limit down against the dollar at $1.45.

Olli Rehn, Europe’s economic and monetary affairs commissioner, stoked fears about the pain ahead in spite of Europe when he said yesterday that the €750 billion (&enclose;638 billion) crisis mechanism agreed last week should be made to such a degree unattractive that countries will not want to use it.

“It is vital that we prepare ourselves for the worst-case scenario. But of path there is the issue of moral hazard,” he said at the annals meeting of the European Bank for Reconstruction and Development.

“This mechanism must be made so unattractive that no EU leader will resort to it.” He besides said that the EU should have an exit strategy from its emergency measures.

The Bank of England warned last week that weakness in the eurozone was the same of the main risks to Britain’s recovery. Jean-Claude Trichet, president of the European Central Bank, declared in an interview with Der Spiegel, the German magazine, that “sagacious changes” were needed in the oversight of countries’ financial positions within the eurozone.

A report this weekend from UBS suggests that the relish for holding euros among private sector institutions and managers of authoritative currency reserves is fading.

“This month’s €750 billion bale of support for the eurozone isn’t sufficient to become the tide of the euro,” said Mansoor Mohi-uddin at UBS, the investing. bank. “That is the verdict both of private sector players, who after this have record shorts, but also of reserve managers that we’ve been visiting about the world. This suggests the decline in the euro will support going.”

UBS predicts that the euro will drop from its current €1.23 horizontal line against the dollar to €1.10 next year. Others consternation it could drop further than that, to dollar parity or beneath, replicating the single currency’s weakness in the early years subsequent it came into being.

State Street Global Advisors, in a rumor to clients on last week’s euro rescue package, before-mentioned: “The package buys time, but does not fix the underlying question . Countries may need more loans over the intermediate term. The shortcoming arithmetic is daunting. Some kind of debt restructuring cannot be ruled on the ~side.”

Commerzbank, the German bank, expects the euro to stabilise and extreme point the year about current levels, but it warns that conditions could arise notwithstanding a slide to parity with the dollar.

“There are risks: a continued disadvantage of credibility for the ECB, difficulties in financing the stabilisation mechanical construction or legal risks could put additional pressure on the euro,” it afore~.