A senior euro zone official said on Thursday financial markets were acting irrationally over the euro area's debt problems and while he was concerned about the fall in the euro, immediate action was not needed.

The euro slumped to a four-year low on Wednesday after a unilateral German move to ban naked short selling on some instruments exposed political divisions in Europe and stoked fears of tighter financial regulation.

Underscoring those splits France, still smarting from the German ban on which it was not consulted, said it did not share the view of German Chancellor Angela Merkel who on Wednesday said the euro was in danger.

I absolutely do not think that the euro is in danger, French Economy Minister Christine Lagarde told RTL radio on Thursday. The euro is a solid and credible currency.

China said the euro crisis -- fueled by Germany's move to stamp on speculators -- was adding to global uncertainties, a factor underlined by fresh weakness in stock markets.

Naked short selling involves selling a financial instrument without first borrowing the instrument or ensuring that it can be borrowed, as would be done in a conventional short sale.

The common currency has been under intense pressure for months as concerns over Greece's heavy debts have cast doubt on the euro zone's ability to pull fiscally weak EU countries out of the mire.

Greece braced for a 24 hour general strike on Thursday in protest against the tough austerity measures demanded by the European Union and the International Monetary fund in exchange for a 110 billion euro bailout.

Jean-Claude Juncker, chairman of the Eurogroup forum of euro zone finance ministers, said the weakness in the euro, down more than 7 percent against the dollar in the past month alone, was likely due to fears that economic growth in the 16 countries that share the currency will slow.

But markets were acting irrationally, he said.

There are expectations that growth is slowing down because of the deficit cuts we have to take, Juncker told Reuters in Tokyo.

There is a certain reluctance to believe the Greeks can overcome the current crisis. I don't think the markets are behaving in a rational way.

NO EURO ACTION YET

The euro rebounded late on Wednesday as traders covered short positions on speculation European monetary officials might move to check its rapid fall.

Juncker, speaking to reporters after meeting Japanese Finance Minister Naoto Kan in Tokyo, said he did not see the need to take immediate action on the euro's rapid plunge but said central banks were in close contact.

Monetary authorities are monitoring closely exchange rate developments and they best know what to do. I'm concerned because the rapidness of the fall in the euro is impressive. I'm not concerned as far as the current exchange rate is concerned.

The instability is worrying China though, which called for an international response.

The European sovereign debt crisis is a challenge not just for the countries that are party to it, such as Greece. In fact, it is a challenge to the stability of the entire international financial market, said assistant finance minister Zhu Guangyao.

It concerns the recovery of the entire international economy, and so it demands a common response from the international community, he said.

Zhu told a news conference the euro zone sovereign debt crisis showed the need for countries to control their debt levels and maintaining the stability of major reserve currencies was very important.

IRRATIONAL OR UNCERTAIN?

Greece and Spain have promised tough austerity measures to reduce their fiscal deficits, and the European Commission has proposed that European Union countries submit their initial budget proposals so the EU executive can make sure countries are doing enough to rebuild their finances.

The European Central Bank has also taken the unprecedented step of buying euro-denominated government debt as part of a 750 billion euro plan to help stabilize markets.

In an effort to counter massive volatility in markets, Germany stepped up its fight against speculators with a ban on some financial trades on Wednesday.

But the move triggered big market falls and wrong footed European governments that said they were not consulted.

Analysts saw the move as a political gesture to placate German public opinion after her party lost a regional election this month.

It again suggests that the Germans are no closer to understanding that the markets are not the problem here. The markets are right to be uncertain about the sustainability of the euro zone in its current form, said Simon Tilford, chief economist at the Center for European Reform.

What is specific to Germany is a readiness to make unilateral announcements on things that would only be doable if they were done collectively...It's pretty populist stuff.

(Writing by Jon Boyle; Editing by Mike Peacock.)

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