U.S., allies agree to compromise on dollar
Published by Florida Times-Union on February 8, 2004.
BOCA RATON -- The United States reached a compromise with its economic allies over the falling dollar this weekend, although how it would be put in place remained vague.
In the communique released at the end of what U.S. Treasury Secretary John Snow called "an awfully good meeting" of the Group of Seven countries, the group said "excess volatility and disorderly movements in exchange rates are undesirable" and it would "emphasize that more flexibility in exchange rates is desirable."
Currency traders have interpreted the latter as indicating a green light to allowing a continued fall in the dollar's value. The Bush administration supports that development as offering a way to increase U.S. exports and deal with the loss of 2.8 million U.S. manufacturing jobs over the past 3 1/2 years.
The statement about volatility was seen as a concession to European members of the group -- which comprises the United States, Canada, Japan, Germany, France, Britain and Italy.
The weaker dollar affects consumers and businesses by making imports from other countries more expensive, while the price of U.S. exports drops. European countries, in particular, have been hurt by the drop in the dollar's value.
With the euro at record lows against the dollar, members of the European Union would like measures to be taken to prop the currency up. U.S. manufacturers, however, have urged the government to do nothing to stop the fall, seeing the cheaper price of exports as a boon to its bottom line.
Commenting on the compromise language, German Finance Minister Hans Eichel said: ''It is important that the exchange rate ... reflect the fundamentals and that we don't have abrupt changes because that would be harmful for the growth of all, even if there are short-term advantages.''
The finance ministers of the G-7 spent much of the two-day meeting discussing growth, Snow said, saying that "recovery is being seen widely through the globe."
In the United States, he said, President Bush's tax cuts have put the country on "a path to sustained growth."
Snow will bring that message to Jacksonville on Tuesday as part of a tour across Florida. The secretary will tour the Advanced Technology Center of Florida Community College's Downtown Campus.
On Iraq and Afghanistan, the G-7 countries welcomed the efforts being made to boost economic growth in the two nations and called on all nations to join in reducing the foreign debt burdens of the two nations to give them a better chance at an economic revival.
The weekend's meeting of finance ministers presages the meeting of the Group of Eight -- the G-7 plus Russia -- to be held at Sea Island, Ga., June 8-10.