The European Central Bank yesterday clashed with the new German government over the exchange rate policy on the euro, the new single currency.

Mr Wim Duisenberg, president of the European Central Bank (ECB), warned that target zones for the euro, the dollar and the yen were "not desirable" as a way of controlling currency turbulence.

Meanwhile, Mr Oskar Lafontaine, German finance minister-designate, reiterated his support for target zones.