G7 leaders seek consensus on coping with dollar's decline
By Reuters
BOCA RATON, Fla. - World financial leaders meeting in Florida struggled yesterday for consensus on how to steady global currency markets amid European and Japanese worries a sliding U.S. dollar could spin out of control.
While comforted by a global economic recovery in the past six months, many finance ministers and central bankers from the Group of Seven wealthy nations are anxious about the potential currency fallout from huge U.S. trade and budget deficits. The dollar's deficit-driven slide has accelerated since the G7 last met in Dubai in September and concluded that more flexible currency policies were needed around the world. That statement was taken by most observers as a dig at countries like China that fix their currencies to the U.S. dollar. But European ministers say this needs to be spelled out in the statement that will follow the Boca Raton meeting. Italian Finance Minister Giulio Tremonti said European ministers might push to alter the wording thrashed out in Dubai so it is clearly aimed at Asian economies. The euro has risen some 10 percent against the dollar since the Dubai gathering, pinching European exporters. "The hypothesis from the European side is referring to the need for more flexibility of Asian currencies," Tremonti told reporters yesterday. One way to ease European concerns might to be to "tweak" the Dubai statement to say that while flexibility was desirable, excessive volatility in relative currency values was not- a bow to Europe's fears its recovery could be stifled by a soaring euro that makes its exports less competitive. Face-saving fix German Finance Minister Hans Eichel said as the formal G7 meeting began there was a general agreement that some progress must be made on currency policy, although what form that will take remained uncertain. "We are all trying to find a common position," Eichel said of his counterparts from the United States, Britain, Canada, France, Italy and Japan. "Everybody knows that currency, which is a very sensitive subject, will be a main discussion point." Other European officials, hinted at movement toward an agreement on the statement's language between the opening dinner on Friday night and the formal G7 sessions yesterday. "Things have moved forward since yesterday evening," a European delegate said. "It's moving towards a clarification." Japan also wants more stable exchange rates, which would save it money by requiring fewer forays into currency markets, while reserving the right to buy dollars if needed to keep the yen from rising too fast. But it likely would oppose a broad reference to Asian currency flexibility because this would be seen by markets as a rebuke from G7 for Tokyo's unilateral intervention. Japan's Finance Minister Sadakazu Tanigaki told U.S. Treasury Secretary John Snow before the formal meeting yesterday that Japan would continue to act to cap the yen if it moved out of line with the underlying economy.

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