G7 warns of 'excess volatility'
Sunday, February 8, 2004 Posted: 0213 GMT (10:13 AM HKT)
The euro's rise to record levels against the dollar could imperil Europe's economy.
BOCA RATON, Florida (Reuters) -- Finance officials from the world's top economies overcame tensions sparked by the U.S. dollar's steep fall to warn markets that "excess volatility" in exchange rates could damage the world economy.
The inclusion of this wording in a statement issued after a meeting of the Group of Seven finance ministers and central bankers on Saturday seemed a nod to European worries that the euro's recent rise to record levels against the dollar could imperil its export-led recovery.
"We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rate markets are undesirable for economic growth," the communique said.
The statement came at the close of a meeting of G7 financial leaders -- from Canada, the United States, the U.K., France, Italy, Japan and Germany -- in Boca Raton, Florida.
"The G7 statement speaks for itself," European Central Bank President Jean-Claude Trichet told reporters after the meeting.
"This reflects the consensus of all participants in that meeting."
In a thinly veiled reference to Asian countries that peg their currencies to the dollar, like booming China, the statement called for greater flexibility in exchange rates of nations where flexibility was limited.
"The various currencies that are not flexible will recognize themselves," Trichet said. "There is not only one, there are quite a few."
This wording was similar to that included in the statement that came out after their last meeting, in Dubai last September, but officials said the new language should clarify for currency markets which countries they are admonishing.
"We continue to monitor exchange markets closely and cooperate as appropriate. In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms," the statement issued on Saturday said.
It also noted that while the global economic recovery had gathered pace, that pace was uneven and countries needed to redouble their efforts to boost growth.
The officials also wagged a finger at Argentina, urging it in the statement to "engage constructively" with creditors and live up to its pledges to multilateral lenders.
A number of G7 officials have expressed frustration at Argentina's slow progress in talks with private bondholders aimed at restructuring $88 billion in defaulted debt.
Buenos Aires has held fast to its offer, made in Dubai last year, of 25 cents on every dollar of nominal debt. |
