Sweden: Could have a sudden loss of confidence in the US dollar because of budget deficit.
Sweden raises dollar concerns with U.S. Treasury
Reuters, 02.23.04, 8:49 PM ET
WASHINGTON, Feb 23 (Reuters) - Sweden's economy minister said on Monday his country was worried about a sharp drop in the U.S. dollar and the implications it could have on an economic recovery in Europe.
Gunnar Lund, on a visit to Washington, said he had expressed Sweden's concerns about risks of a further decline in the U.S. dollar during a meeting with U.S. Treasury Secretary John Snow.
The euro was trading around $1.2550 against the dollar in New York on Monday, after hitting a record high of $1.2927 last week.
Sweden, Britain and Denmark are the only members of the 15-nation bloc that are not members of the EU's common currency, but Lund said the Swedish crown basically tracked the euro against the U.S. dollar.
"The fact that Europe is pulling out of a recession and have a recovery in reach, we are in a very vulnerable situation," he told reporters after meeting Snow. "If we get hit in this situation by a sharp additional fall in the dollar, corresponded with a strengthening of the euro, this is a dangerous situation," he added.
Lund said a strong euro in dollar terms had implications for exports and competitiveness.
In the meeting Lund said he had also raised fears about the growing U.S. budget deficit and the risks it held for the rest of the world.
"If they cannot make more credible that they will be dealing in a determined fashion with the mounting deficit, this is likely to influence people around the world and you can easily have a sudden loss of confidence and have disrupted developments in exchange markets which would do harm to us and to emerging markets," he said
He said it was unclear from current U.S. policy that the deficit would be substantially reduced.
The Bush administration has said it intends to halve the budget gap, projected at a record $521 billion this year, over the next five years.
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