G7 Seeks Consensus on Coping with Dollar Drop
Couching a joint statement this time is proving tricky, with the United States happy with the boost a weaker dollar gives its own exporters -- especially in an election year -- and apparently unfazed by the pain it may cause elsewhere
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By Mike Dolan
BOCA RATON, Fla. (Reuters) - World financial leaders, meeting in a Florida resort for talks on the global economy, face the tough job Saturday of agreeing on wording to stop the U.S. dollar's drop from spinning out of control.
While comforted by the sharp recovery of the global economy over the past six months, many of the finance chiefs and central bankers from the Group of Seven club of wealthy nations are anxious about the potential currency fallout from huge U.S. trade and budget deficits.
European G7 members, whose exporters have been stung in recent months by the euro's surge to record highs against the dollar, said on Friday they wanted the group to agree to caution markets against further extreme currency swings.
Japan also called for more stable exchange rates while reserving the right to intervene in markets to cap the yen.
Couching a joint statement this time is proving tricky, with the United States happy with the boost a weaker dollar gives its own exporters -- especially in an election year -- and apparently unfazed by the pain it may cause elsewhere.
G7 sources said the communique's wording was still up in the air late on Friday and would not be finalized until Saturday. Ministers said central bankers would be closely involved in that process.
Ministers will begin formal discussions at 9:00 a.m. Saturday and issue a final statement around 5 p.m.
U.S. Treasury Secretary John Snow spent much of Friday in bilateral meetings with his G7 counterparts, aiming to defang their most potent criticism of the Bush administration's economic stewardship by saying action was under way to tame huge U.S. budget and trade deficits.
In separate meetings with British, Canadian, French, German and Italian finance ministers, Snow admitted a whopping $521 billion projected U.S. budget deficit in 2005 was "too large" but was on the way to being halved by 2009.
European and Japanese officials have warned that the U.S. deficits -- financed by borrowing from abroad -- are a hazard to global economic stability and have used them to counter U.S. insistence they do more to speed up growth.
The tack, a Treasury official said, was to argue that while the U.S. deficit was large, it was "understandable, given recession, a stock market collapse, two wars and corporate scandals -- it's understandable but we still want to bring it down."
By Friday night at a formal dinner hosted by Snow, the U.S. Treasury chief was again saying, "The number one issue this weekend is continuing the process to create global growth."
Ministers will also discuss emerging economies, progress on tracking terror-related funds and the reconstruction of Iraq (news - web sites).
Argentina may face some pressure to be more flexible in its slow-moving debt renegotiation talks with private bondholders.
