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To: Hawkmoon who wrote (90709)	9/27/2007 11:09:22 AM
From: ChanceIs	Respond to of 306849

>>>when the Europeans will cry "uncle" and move to support the USD vs Euro exchange rate?<<< If they do, you can be sure that Sen. Schumer and Dodd will be over there in a heartbeat railing against currency maniupulation. ;-) Try this one on for size: Euro's rise breaking the bank for Sarkozy CARL MORTISHED Globe and Mail Update September 27, 2007 at 7:05 AM EDT LONDON — It's a classic ploy of any businessman on the skids: Blame the bankers. "I could have saved the company but the banks pulled the rug from under me" is the standard whine and something like that has been heard in Paris over the past year, reaching a crescendo in recent weeks. The euro has risen to a record high against the U.S. dollar and its appreciation against the greenback, yen and Chinese yuan is causing French President Nicolas Sarkozy to foam at the mouth. His grand plan to revive the French economy with pump-priming tax cuts is being undermined by a strong currency and high euro interest rates. The banker in question is Jean-Claude Trichet, the European Central Bank president, who sneers at the French President and lambastes France for its reckless spending. Mr. Sarkozy wants the central bank to pay more attention to other factors, such as currency rates and the general state of euro zone economies when it sets interest rates, rather than its relentless focus on inflation, which led the bank to raise its benchmark rate eight times to 4 per cent since 2005. This week, Mr. Trichet has been getting his own back with the publication yesterday of France's budget plan for the coming year; it didn't make a pretty picture. The nation has a huge debt burden, representing 64 per cent of GDP, while the public sector deficit is expected to be almost €42-billion ($60-billion), some 2.3 per cent of GDP, and that assumes an optimistic economic growth rate of between 2 and 2.5 per cent. Christine Lagarde, the French Finance Minister, admitted at a European Union ministerial meeting in Portugal that France was unlikely to meet its target of a zero deficit in 2010 without a surge in growth. She has spoken of a plan de rigueur, an austerity package, and last Friday, François Fillon, the Prime Minister, pronounced that France was bust as he fended off demands from farmers for more subsidies. Over the weekend, Mr. Trichet put the boot in, suggesting that France's situation was "critical" due to chronic overspending. The scent of internal division has driven the French media to speculate that the man in the Élysée Palace is at odds with his ministers. However, it's hard to see any signs of the austerity at which Mrs. Lagarde hinted. This is a budget that depends on growth to balance the books and few believe that France will ride through the gathering global financial storms unscathed. It's fair to say that Mr. Sarkozy wouldn't be nagging the ECB if the French economy was throwing off billions in surplus tax revenues. The country has a spending problem and France's newly invested leader had to deliver on promises that he would lighten the fiscal load, offering workers tax-free earnings for every hour that exceeds the statutory 35-hour week. It's intended to kick-start a period of strong growth that would sugar the pill of Mr. Sarkozy's threat to give a severe haircut to the rights and privileges of France's pampered public sector workers. So far, these workers have escaped the scythe. If he is to avoid an ugly confrontation, the French economy must grow, which brings the President back to the problem of the strong euro. Underlying Mr. Sarkozy's campaign to change ECB policy is a debate over the extent of the bank's independence. It is guaranteed in the 2004 Maastricht Treaty, but for Mr. Sarkozy there are no sacred cows where France's interests are concerned. He has attempted to rally support, arguing that the treaty refers to the right of member state finance ministers to "formulate general orientations for exchange rate policy." The French government has latched on to this phrase, to the extent of angering its main ally. For Germany, inflation is the greatest economic ill and Germans tend to blame the political disasters of the 1930s on the collapse of the mark. For Germany, the price for giving up the mark was a solid anti-inflation strategy for the euro. The French President could be just having a go but if the French economy fails to take off and the U.S. dollar continues to fall, we should not expect him to give up his fight to get more control over the ECB and it could have grave consequences for the single currency.