Asia urged to share the pain of dollar's fall
By George Parker in Stresa
Published: September 14 2003 20:22 | Last Updated: September 14 2003 20:22
Europe will this week issue a new appeal to Japan and other Asian countries to share the pain of the falling dollar and allow their weak currencies to rise.
European finance ministers, meeting in the Italian resort of Stresa on Saturday, agreed to take a strong message to next weekend's G8 ministerial meeting in Dubai that Asian countries must assume more responsibility for the global recovery.
The move reflects the growing dismay among European Union policymakers that the euro is being forced to bear the brunt of the dollar's fall, and increasing resentment from manufacturers.
However, most of the finance ministers went out of their way to avoid pointing a finger directly at China, whose weak renminbi currency has been identified by US policymakers as adding to its current account deficit.
Wim Duisenberg, president of the European Central Bank, said: "The problem is much broader than China alone. Virtually all east Asian countries, which are the growth pole of the world, have pegged their currencies to the dollar.
"The burden of adjustment falls primarily on the euro and Europe. We will discuss if we can come to a more even basis for the adjustment which has to take place at any rate. "
Giulio Tremonti, the Italian finance minister and chairman of the Stresa talks, is under pressure from manufacturers at home and wants to take a tough message to the G8 ministers, who will gather during the weekend meetings of the World Bank and International Monetary Fund.
In a draft speech to be delivered at the weekend, Mr Tremonti says: "Exchange rates should reflect economic fundamentals and be consistent at regional and global levels."
Francis Mer, the French finance minister, said: "The problem for us in Europe is that we do not want to be the only ones to bear the burden of dollar adjustments, upwards or downwards. "
But Gordon Brown, chancellor of the exchequer, emphasised the need for all parties to do more to foster growth, refusing to comment on the low level of China's fixed-rate renminbi.
Many ministers privately believe it is counter-productive to put overt pressure on China. John Snow, US treasury secretary, has been rebuffed after urging Beijing to let the renminbi rise as a way to ease the US trade deficit. "It may be our problem, but it's their currency, " admitted one ECB official.
Gerrit Zalm, the Dutch finance minister, acknowledged China's fears of instability if it simply allowed the renminbi to float and suggested instead a peg to a broader basket of currencies.
The meeting of European ministers also succeeded in postponing a head-on confrontation with France, over its plans to breach the EU's budget rules for a third successive year in 2004.
Mr Mer, who presents his budget on September 24, said he was prepared to accelerate reforms to bring the deficit below the pact's ceiling - 3 per cent of GDP - in 2005. |
