Germany's Clement Urges China, Japan to Stop Stabilizing Dollar
Oct. 24 (Bloomberg) -- German Economics and Labor Minister Wolfgang Clement urged China and Japan to allow their currencies move more freely against the U.S. dollar, reducing the harm to Europe's exports caused by exchange-rate fluctuations.
``We need China and Japan to act differently and not pump money into the market to stabilize the dollar,'' Clement said in a televised interview with Bloomberg News in Berlin. ``Otherwise the problem ends up here in the euro region.''
The euro has gained more than 8 percent in the past two months against the dollar, hurting exports, which account for about a fifth of Europe's economy. The International Monetary Fund said yesterday that the dollar probably has further to fall. It was trading at $1.1770 per euro at 1:51 p.m. in Frankfurt.
The Group of Seven Nations at a meeting in Dubai last month urged more flexibility in global exchange rates. U.S. President George W. Bush and European leaders want China to abandon its eight-year-old policy of pegging the value of its yuan to the dollar, which they say gives its exporters an unfair advantage.
They also want Japan to curb yen sales, which it has used to weaken the currency and protect the nation's export-led recovery. Finance ministers from the Group of 20 countries will discuss the Chinese currency and its peg to the dollar at a weekend meeting in Mexico, U.S. Treasury Secretary John Snow said this week.
Clement said record U.S. trade and budget deficits are a ``risk'' to the global economy. Any abrupt changes in exchange rates resulting from the deficits would be ``problematic'' for the German economy, he said.
ECB `Not Worried'
Germany's Economics Minister said he has the ``impression that the European Central Bank is watching developments carefully,'' though he declined to elaborate on what measures, if any, the bank may be willing to take.
The ECB is ``not worried'' about the euro's current exchange rate, ECB President Wim Duisenberg said in an interview yesterday, suggesting the bank sees no need to sell the currency to slow its appreciation.
China is on its way to becoming a center of the world economy and South-East Asian nations are ``leaping,'' helping the German economy to recover and add jobs next year, Clement said. ``That will benefit the labor market from summer.''
DaimlerChrysler AG, the world's fifth-largest carmaker, has said it expects to sell as many as 15 percent more cars in Asia next year as demand in China grows. Almost 40 percent of the companies surveyed by the DIHK industry association, which represents more than 25,000 companies, last month said they expect exports to rise, up from 27 percent in June.
`Vicious Circle'
Even so, Germany must do more to revamp its welfare system and revive the domestic economy, Clement said. Unemployment, which reached a 4 1/2-year high earlier this year, was at 4.39 million in September.
``The forces driving the economic upswing have yet to be mobilized,'' he said. ``The vicious circle of weakening growth and high unemployment has to be broken.''
Germany's lower house of parliament a week ago approved Chancellor Gerhard Schroeder's plans to cut benefits for the 2 million long-term unemployed and trim welfare for the jobless who reject low-paid jobs. Schroeder has threatened to resign should the bill fail to pass into law this year.
``This isn't the end yet'' of the reforms, ``but it is what's possible at the moment,'' Clement said. ``There has been no phase in German history since the 1950s with as much fundamental change and at such a speed.''
Last Updated: October 24, 2003 08:16 EDT |
