By Brian Swint and Rainer Buergin
Oct. 20 (Bloomberg) -- European finance chiefs expressed “worries” about foreign-exchange movements and backed the U.S. administration’s stated preference for a strong dollar after the euro climbed to a 14-month high against the American currency.
“Excessive volatility” in currency rates is “bad for economic development,” European Central Bank President Jean- Claude Trichet said in an unscheduled appearance at a press conference late yesterday after a meeting of euro-area finance ministers in Luxembourg. “It’s a problem which worries us,” said Luxembourg’s Jean-Claude Juncker, who led the talks.
The euro has gained almost 20 percent against the dollar since February, making the region’s exports more expensive to overseas buyers and threatening the recovery from the worst recession since World War II. U.S. Treasury Secretary Timothy Geithner said on Oct. 3 that it is “very important” for the U.S. to have a strong dollar.
“We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar,” Trichet told journalists in Luxembourg.
“We want a strong dollar; we need a strong dollar,” French Finance Minister Christine Lagarde said after the talks. “We must remain disciplined” on the message, she said.
‘Strong Level’
“The euro is at a strong level and they don’t want to see it rise any further,” said Grant Lewis, an economist at Daiwa Securities SMBC Europe Ltd. and a former U.K. Treasury official. “This is a shot across the bow, but I’m not sure it will be effective. It’s very difficult to turn the tide.”
The dollar traded at $1.4973 per euro as of 8:41 a.m. in London, compared with $1.4965 in New York yesterday, after earlier declining to $1.4981, the weakest since August 2008.
“We reaffirm a shared interest with our partners of the major floating currencies that we have a solid and stable currency system,” Trichet said. “The eurogroup and the ECB will echo this position, which has been recently repeated by the American authorities.”
Trichet and Juncker will travel to China with European Union Monetary Affairs Commissioner Joaquin Almunia before the end of the year to discuss currencies, Juncker said. The trio went to Beijing two years ago to push Chinese leaders for a faster “pace of appreciation” of the yuan, a plea that was rebuffed at the time by Premier Wen Jiabao.
Chinese Counterparts
Juncker, who serves as Luxembourg’s Treasury minister and premier, yesterday said it was too early to talk about what they would say to their Chinese counterparts this time. “We’re not pre-announcing a message,” said Juncker, who serves as Luxembourg’s Treasury minister and prime minister.
Juncker reiterated that the European economy is still too weak to remove record-low interest rates and government spending programs. Governments have committed billions of euros to boost the economy, while the ECB is lending banks as much money as they want for up to a year and purchasing covered bonds in an effort to get credit flowing again.
“There are clear signs of recovery, but there’s still a balance between the positive and negative signs,” Juncker said. If new European Commission forecasts due next month show a “genuine recovery,” then stimulus measures should “be gradually withdrawn” starting in 2011, he said.
The euro-area economy barely contracted in the second quarter as Germany and France returned to growth. The region’s gross domestic product will expand 0.3 percent in 2010, the International Monetary Fund forecast on Oct. 1, as it trimmed its estimate for this year’s contraction to 4.2 percent from the 4.8 percent it projected in July.
Climate Change
The euro-area finance ministers will be joined today by their colleagues from the rest of the 27 EU nations. Swedish Finance Minister Anders Borg, who is leading today’s discussions, said he hopes to make progress on financial- supervision plans and proposals for financing measures to combat climate change.
“We need a broad political agreement on the macro supervisory structure,” Borg told reporters as he arrived for the talks. “We’ve been in a period of very difficult financial turmoil and obviously we need to strengthen the traffic-police role in this situation.”
Borg also said he sees “some of the contours” of an accord on climate-change funding. The U.S., China, the EU and 14 other countries have moved closer to an agreement on the need for more climate aid for developing nations, on how that money will be managed and on how commitments by developed and developing countries will be reflected in an international agreement, U.K. Energy Secretary Ed Miliband said after meetings yesterday in London.
400 Tractors
The euro-area ministers’ meeting yesterday was delayed and then displaced by farmers demonstrating against agricultural policies. The meeting was moved to a nearby chateau after at least 1,500 farmers and about 400 tractors marched through Luxembourg’s streets to the conference center where the officials normally meet.
The protests were aimed at a meeting of agriculture ministers that took place at the same venue before the finance chiefs were scheduled to meet. The agriculture officials, whose meeting wasn’t disrupted, agreed to extend intervention buying of butter and skimmed-milk powder until the end of February to bolster milk prices.
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Rainer Buergin in Luxembourg at rbuergin1@bloomberg.net
Posts
No comments:
Post a Comment