UPDATE: Lagarde:Forex Language Reflects Changes Since Last G7
(Updates with comments on IMF growth forecasts)
WASHINGTON -(Dow Jones)- French Finance Minister Christine Lagarde said the change of wording regarding currencies in the Group of Seven leading industrial nations' official statement reflected the changes that occurred on foreign exchange markets since the last G7 meeting in Tokyo in February. However, she declined to say what currencies were targeted by the change of words.
"The change of language reflects the precise analysis of what happened since the last G7 meeting," Lagarde told reporters at a press briefing Friday after the G7's meeting in Washington. She stressed that the change of language was the first since the Boca Raton, Fla., G7 meeting in February 2004. "We hope the concerted wording will help on currencies" she added.
"Ministers and central bankers thought it necessary to attract market attention to what happened since the last G7," Xavier Musca, head of the French treasury added.
However, Lagarde declined to say whether G7 ministers pointed their fingers at a specific currency behind the change of wording. "We could have mentioned the yen, the yuan, the euro or the dollar," she said.
Musca also emphasized the use of the word "concerned" in the communique about currencies. The G7 said it was concerned about possible implications of sharp fluctuations in major currencies for economic and financial stability.
"That's what's important," he said.
While Lagarde said that the G7 agreed the global economic outlook had worsened in recent months, she stressed that European members of the G7 generally disputed the latest International Monetary Fund growth forecasts, finding them too pessimistic.
"European G7 members generally took exception with the IMF growth forecasts because the European economy is resisting well," she said. She cited in particular job creation as an example of the resilience of the European economy.
Lagarde explained that the IMF based its predictions on correlations observed between the U.S. and Europe in previous crises, and that these may not be repeated in the current situation. "The IMF predicts a tightening of credit conditions that we don't see at the moment," she added.
Lagarde added that the U.S. also found the IMF's forecasts on the U.S. economy were slightly too pessimistic. In its latest World Economic Outlook, the IMF slashed its U.S. growth forecast by a full percentage point from January to a 0.5% pace this year, and sees it edging up to a 0.6% rate next year. The IMF trimmed its euro-zone growth estimate to 1.4% this year from an earlier estimate of 1.6%, and the region's economy is expected to continue to slow to 1.2% in 2009.
Lagarde said that France's growth target of between 1.7% and 2% this year was "achievable."
She also praised the collective approach taken by the G7 to tackle the current financial crisis and said it contrasted with the way the G7 had dealt with previous crisis, in particular in 2001-2002.
"We can congratulate ourselves on our multilateral approach. This is in contrast with previous piecemeal approaches, which had led to different regulations here and there," she said, citing the Sarbanes-Oxley corporate governance regulations put in place in the U.S. in the wake of the Enron scandal.
Asked why the G7 didn't recommend the use of public money to prop up banks affected by the current credit turmoil, Lagarde said the group was mindful of the different situations existing between countries. "In some countries it's legitimate to use taxpayers' money, in others it's not," she said.
-By Nathalie Boschat, Dow Jones Newswires; 202 289 4286; nathalie.boschat@dowjones.com |
