The euro has got off to an inauspicious start and while five months is a short period in the lifetime of any currency there can be little cause for celebration in its performance so far. Few are willing to boast about the benefits of the new currency other than the advent of low interest rates. And from the perspective of several participating countries, the latter are too low.

The euro, it seems, is being undermined from all angles. Public rows between central bankers and politicians have not inspired confidence in the management of the currency and there have been mixed messages from the European Central Bank in Frankfurt over whether it is adopting a policy of "benign neglect".

There is evidence too of worsening fundamentals in some of the main economies, particularly Germany and Italy.

Indeed, such is the state of affairs that some of the most vocal opponents of the euro have been able to take satisfaction from its performance so far.

And the British euro-sceptic media are also showing signs of delight. Mr Dominic Lawson, son of the former chancellor, Sir Nigel Lawson, remarked at the weekend that it was no wonder the governor of the Bank of England, Mr Eddie George, was reluctant to see a well-managed sterling changed for a euro that was already storing up inflationary pressures.

But domestic factors aside, international events also appear to have conspired against the new currency. Its performance has been influenced by among other things, the ongoing crisis in Russia, the war in Kosovo and a continuing booming US with the prospect of higher interest rates there.

Beneath the weight of all this the euro has been sinking like a stone - from a launch week high of $1.17 to $1.04 this week.

Central bankers, who generally like a strong currency, have recently been trying to stem its fall. Mr Hans Tietmeyer, president of the German Bundesbank, did his best but to no avail.

He said he was "not happy" with the euro's decline while his designated successor Mr Ernst Welteke also pitched in saying "this development has got to stop". But again without result.

In the meanwhile, central bankers are determined to lay all possible blame at the feet of politicians. "The destiny is in the hands of policymakers," Mr Wim Duisenberg, president of the European Central Bank said this week.

Mr Duisenberg may have some justification for his remarks. The latest trigger for the weakening of the euro was news that Italy was going to increase borrowing, sparking fears that other countries would follow suit and worries about how seriously the politicians take the stability and growth pact which is designed to maintain disciplined monetary policy.

Mr Edgar Meister, a member of the Bundesbank's directorate, was most forthright on Tuesday when he described the EU finance ministers' decision to relax the strictures on Italy as "a stab in the back" for the ECB's monetary policy. He insisted that Italy's case must remain an exception in Europe.

But others, such as Dr Dan McLaughlin, chief economist at ABN Amro, point out that the weakening of the euro may be simply cyclical and nothing at all to do with structural problems in the various economies.

He points out that over the past 10 years the deutschmark has traded between $1.37 and $1.95 compared with its value this week at around $1.8. "The euro is in normal range, although towards the end of it," he says.

But if the euro were to fall to parity with the dollar then it would be outside that range and it could be argued that there was something other than a cyclical effect at work.

At the moment Dr McLaughlin argues the weakness is simply a reflection of the differing growth rates in the euro zone and the US. After all, the market ought to react to weak growth with a falling currency which should then help boost growth again. Of course a decline in US stock prices would achieve the same result.

Although the ECB board is getting a little anxious, it believes, as a rule, that there is little point in intervening to buy the currency - despite some recent reports. Such action rarely works unless it is used to boost market forces and the net impact would be short term at best.

A core reason why the central bankers may not be too upset at the sight of a weakening currency is that Germany and Italy and indeed all other euro zone exporters have been given a large competitive boost particularly when selling goods into the US or Britain. The other side of a declining currency, rising import prices, hardly bothers them.

Overall Europe is a very closed economy with the result that inflation is largely internal - unlike the Irish model where nearly all inflationary pressures are imported.

This is also where the differences between the various countries in the euro zone come most sharply into focus. The pound is now heading towards 82p against sterling which is likely to boost inflation here. According to Dr McLaughlin it will end the year at 2.6 per cent. But if the decline against sterling is sustained it could be above 3 per cent.

In many respects most of these difficulties were forecast. There were always question about the one-size-fits-all monetary policy framework for the currency. It has recently been reported that even Mr Duisenberg would have liked to have delayed the launch of the euro to achieve real convergence between the various economies.

The Bank of England's Mr George has been far blunter. He told a Commons committee that "it is too soon to tell whether in fact all the participating countries will be able to exist comfortably within this single monetary policy framework".

He also asked whether the central monetary policy "allows demand across the region to be kept in line with the supply side with very serious adverse impacts on particular member countries".

In plain English this means he is worried that the single interest rate across the euro zone might lead to slower growth and higher unemployment in some parts and inflationary booms in others.

The markets are less sure now that Britain will even be participating in monetary union in the short term. The interest rate markets in Britain are now pointing to a recovery next year with interest rates rising once again.

Indeed at 2001 - when Britain should be on the verge of joining EMU - it is pencilling in a 2 percentage point difference in interest rates between the euro zone and Britain.

This scenario would be the worst possible one for the Republic as the governor of the Central Bank remarked last week.

While it may be simple electioneering, the British Prime Minister, Mr Blair, told the Sun newspaper last month that he may wait for a third term to hold a referendum on joining.

If that were to happen, particularly if the decline in the euro is reversed, it could have very serious implications for Irish exporters.