The week's gentle recovery in the value of the euro has offered the European Central Bank (ECB) a respite from international criticism following the worst fortnight in the institution's brief history. As they gather in Frankfurt tomorrow, the 17 members of the Bank's Governing Council will be hoping that signs of a slowdown in the US economy, combined with the lingering threat of intervention and the prospect of another interest rate rise, will prevent another plunge in the currency's value.

The euro's poor performance on the financial markets is an embarrassment and a headache for the central bankers but it has put a smile on the face of one leading European: Budget Commissioner Ms Michaele Schreyer.

Ms Schreyer said yesterday that, because of the euro's weakness against the dollar, the EU would spend almost €1 billion less than planned on agriculture next year. Forecasts on farm spending issued in May were based on a euro/dollar exchange rate of 99 cents but this has now been revised downwards to 91 cents.

The lower rate means the Commission will need less money to pay export subsidies designed to bridge the gap between high EU farm prices and lower world commodity prices, which are denominated in dollars.

The money saved will help the EU to provide emergency aid for Serbia's newly elected government and to extend its aid to other Balkan countries.

"These new estimates show there is room for the redeployment of money in the budget without cutting the obligatory payments to farmers," Ms Schreyer said.

As the euro remains stubbornly around 85 cents, Ms Schreyer's revised exchange rate prediction itself looks optimistic, although the Bundesbank President, Mr Ernst Welteke, yesterday revived speculation that the world's leading central banks were preparing to intervene in support of the euro once again.

Some analysts believe the central banks are waiting until after the US presidential election on November 7th before repeating the action they took in September. The strength of the dollar has become a burden for many US companies that export to Europe and the US Treasury, which has the final say in whether the US intervenes in financial markets, would almost certainly welcome a slight fall in the dollar's value.

Few Frankfurt analysts expect the ECB to increase interest rates at tomorrow's meeting but many predict rates will rise before the end of the year, possibly in two weeks. Figures released yesterday showed prices charged by factories in France, Italy, Spain and the Netherlands soared in September, partly on account of the sharp rise in oil prices. A survey by the German Chamber of Industry and Commerce predicts strong growth in Europe's biggest economy next year and expects German firms to take on 300,000 to 400,000 workers.

The fall in German unemployment, mirrored in France, ought to be a cause of celebration but central bankers tend to see good news as a threat to stability. If the ECB increases interest rates before the end of the year, it will be partly due to a fear that lower unemployment will encourage unions to demand bigger wage increases next year.

The ECB has, in fact, acknowledged that European workers have exercised great wage restraint this year - although inflation exceeds the central bank's target of 2 per cent.

The central bankers, who take most decisions by consensus rather than by voting, will have to consider their next move on interest rates carefully. Tightening monetary policy further risks strangling economic growth in the euro zone, which some indicators suggest may not be as robust as the ECB believes.

Much of Germany's economic success, for example, is based on an export boom that owes much to the euro's weakness. If market intervention and fears of a slowdown in the US enhance the euro's value and excessively high interest rates make borrowing too expensive, exporters would be the first to suffer.

The ECB received praise from an unexpected quarter yesterday when the Governor of the Bank of England, Mr Eddie George, said the central bank should not be blamed for the euro's weakness. Mr George, who has long been regarded as something of a euro-sceptic, said the exchange rate reflected capital outflows to the US rather than the performance of the euro zone economy.