Alan Greenspan, chairman of the Federal Reserve, has marked the final run-up to the introduction of euro notes and coins with a speech highlighting the impact on the currency of competitive flaws in the European economy.

With one month to go before the start of the currency change-over on January 1, Mr Greenspan told a conference in Washington that the euro's persistent weakness against the US dollar reflected the widespread belief that America's economic performance will remain superior to western Europe's in the years ahead.

The euro has struggled against the dollar since its inception - as a set of fixed exchange rates across member European currencies - in 1999.

It hit new lows against the dollar last year and currently flirts with four-month lows even as the US economy struggles with recession.

The unrelenting flow of capital from Europe to the US driving this phenomenon is explained by the fact that Europeans are "finding many investments in the United States persistently more attractive than those at home", he said.

Instead, they believe "productivity growth in the US is likely to be greater than that in continental Europe in the years ahead".

The main reason, Mr Greenspan argued, was Europe's relatively rigid labour markets. Firing workers was easier and cheaper in the US, so American companies have more freedom to pursue labour-saving and productivity-raising technologies and management techniques.

Those technologies and techniques are available to all but the freedom to apply them is greater in the US, Mr Greenspan said.

This faith in the US explains why the euro has remained persistently weak against the dollar, in spite of America's large trade deficit - which has bolstered the supply of dollars abroad - and the current recession.

The euro has a lot working in its favour but it can take centuries for currencies to establish themselves as international mediums of exchange, Mr Greenspan added.

"We have not yet reached the three-year mark since the euro appeared as a currency - a very short time by standards of international monetary history," he said.

While there were numerous factors that could conceivably work in the euro's favour in the years ahead, for now its performance may depend, "at least in part", on the "success of Europe in matching the expected rates of return on US assets", the Fed chief said.