SYNOPSIS: The Euro-11 are too concerned about a pointless worry-- Exchange Rates.

DAVOS, Switzerland -- Maybe it's a sign of maturity; or maybe it's just that typical American obliviousness to the outside world. Whatever the reason, the United States has an admirably relaxed attitude toward the international value of its currency. When the dollar slides against the yen, we do not take it as a slur on our national virility. Indeed, the strong yen mainly has the Japanese worried, because they fear -- rightly -- that it may price their goods out of world markets and make their now-you-see-it-now-you-don't economic recovery vanish into thin air.

As far as the economic fundamentals are concerned, euroland -- the group of 11 European nations that has adopted the euro as its common currency -- ought to be as blasť about currency fluctuations as we are. Like the United States, euroland is a huge economic area, mainly trading with itself; if its exchange rate fluctuates, as exchange rates will, why should it be concerned?

In fact, however, the decline of the euro since it was introduced at the beginning of last year -- it was worth $1.17 at the outset, and finally fell below $1 last week -- has led to much wailing and rending of garments.

In strict economic terms this dismay is not warranted. Serious students of the new currency (eurologists?) will tell you that the true test of its success is internal: does it deliver the promised unification of the European market? Does it enhance the economic stability of the euroland nations? And for what it is worth, things are off to an O.K. if not great start: the first year of European Monetary Union has actually been a fairly prosperous one for most E.M.U. members. It's just that the U.S. is doing even better -- and so the euro has been falling against the dollar.

The reason this matters is that although the serious economic case for E.M.U. has always been internal and long term, some euro enthusiasts -- the French in particular -- have always had a less creditable agenda: the desire to stick one in America's eye, to take the dollar down a peg. Over the long years of discussion that led to E.M.U., I have heard over and over again the claim that by challenging the dominance of the dollar, the euro will somehow lead to a large transfer of wealth and power across the Atlantic.

This was and is nonsense: no doubt in the year 2005 Russian gangsters will make payoffs with 100-euro notes instead of $100 bills, but so what? Though it may be foolish, however, this hidden agenda means that many Europeans have a predisposition to judge monetary union not by the performance of the European economy, but by the euro's competitive status against the dollar. And this in turn means that the latest slide in the euro presents a dilemma for the barely year-old European Central Bank: does it defend the euro's prestige -- which it can only do by putting its fundamental goals at risk? Or does it stand by its principles, let the exchange rate decline and live with the resulting embarrassment?

Up until last week, the E.C.B. was playing a dangerous game, trying to have it both ways. Officially it had no target value for the euro-dollar exchange rate. But repeated statements by E.C.B. officials that they regarded their currency as undervalued were taken by markets as a strong hint that the euro would not be allowed to fall below "parity." And this hint itself supported the euro: whenever the exchange rate fell close to $1 (and it has in fact spent most of the last few months hovering just barely above parity), speculators would buy the currency, figuring that it could go up but not down.

Now the game is up. The only effective way to strengthen the euro now is to raise interest rates -- and thereby threaten to undermine the growth of the real European economy. On the other hand, if the E.C.B. does not raise rates, speculators may declare open season on the currency and at least temporarily drive it still lower.

The right thing to do is nothing. There will be some jeering headlines, but a month or two later people will look around, see that Europe is still standing and forget about the whole thing. The question is, Does the E.C.B. have the courage not to act? We'll soon find out.

Originally published in The New York Times, 1.30.00