US´ Snow: budget deficit too high; current a/c deficit sign of strength UPDATE
Wednesday, November 17, 2004 12:50:37 PM
afxpress.com
US' Snow: budget deficit too high; current a/c deficit sign of strength UPDATE (updating with quotes given to media after the speech)
LONDON (AFX) - Treasury Secretary John Snow pledged action to curb the US' huge budget deficit but cited the size of its current account deficit as evidence of economic strength
While acknowledging that the twin US deficits are playing a role in global economic imbalances, he said in a major economic speech in London that a "shared responsibility" among the world's major powers is required to fix the problems
Snow reiterated themes he has long been stressing: that stronger growth and free markets will cure most of the ills facing the global economy
Snow also stuck with the same message about the dollar that he has issued in recent months -- that while markets should set exchange rates, the US is not seeking to weaken its currency
"Our policy is for a strong dollar," he said in remarks prepared for the speech at The Royal Institute of International Affairs. "Our dollar policy remains unchanged because a strong dollar is in both the national and international interest." Speaking to reporters after the speech, Snow said: "We believe in open and competitive currency markets. No-one has ever devalued their way to prosperity." He dismissed speculation of possible central bank intervention to slow the decline of the dollar, saying: "The history of efforts to impose non-market solutions is at best unrewarding and chequered." "Why do I continue to espouse a strong dollar policy? Because it's our policy," he said
Pressed further on the effectiveness of this, he stated: "The policy is the policy." Facing criticism in Europe and elsewhere about what some call a dangerous path of deficits that has weighed on the dollar, the treasury secretary acknowledged in his speech that the US is less than perfect in some areas, but said other nations must help remedy the problems
Snow said the US is serious about tackling its budget deficit, which hit a record 413 bln usd in the latest fiscal year
This deficit, "from my perspective, is our most pressing issue," Snow said in the speech
"It is too large and needs to be brought down... It is being addressed." But Snow characterised the current account deficit as a sign of US economic strength, arguing that it will diminish as other countries' economies grow more rapidly
"The current account deficit is a shared responsibility," he said
He said the US hopes to narrow this deficit by encouraging higher levels of savings among US citizens, but that the trade gap will come down only when the economies of US partners start growing more quickly
While critics of US policies talk about the twin US deficits, Snow argued that more attention should be paid to the "growth deficit," or the disparity between economic growth in the US and other key economies, especially Europe
"Economic expansion is not as balanced as it could be," Snow said
"Where countries are growing too slowly, they need to adopt pro-growth policies... In today's interconnected global economy... stronger growth rates in those places are critical if we are to achieve economic prosperity for all." Snow said he will deliver this message to the G20 meeting of major industrialized nations and emerging market economies opening Friday in Berlin
Talking to the media after the speech, he said: "Unbalanced growth in the world contributes to the current account deficit." "This isn't the US preaching to Europe or Japan. This is an acknowledgement of the shared responsibility we have to make the world a better place." Another step to reducing imbalances would be to get China -- which plays an ever increasing role in global trade -- to float its currency or ease the fixed peg to the dollar, Snow said
"The Bush administration has had an unprecedented level of engagement with the Chinese government on its exchange rate policy," he said, adding that Beijing is taking "significant steps consistent with China's move to a flexible and market-based exchange rate." Speaking to reporters after the speech, he said he prefers not to talk of a fixed timetable for China to move towards a more flexible exchange rate
"I think we'll get a much better result through quiet diplomacy. The US has engaged China in a very direct dialogue," he said, adding that he has told China: "You ought to move to a flexible currency". He added: "We're saying, 'let's get on with it,' and they are getting on with it." newsdesk@afxnews.com rl/ag/wai/jms/jsa For more information and to contact AFX: www.afxnews.com and www.afxpress.com |
