Euro ministers fall short of pressing dollar, target RMB
Finance ministers from the 13- nation bloc sharing euro failed yesterday
to seek a tougher stance against the appreciation of their single currency
versus the US dollar, taking China's RMB as an easy target.
"We affirm that
exchange rate should reflect economic fundamentals and that excess volatility
and disorderly movements in exchange rates are undesirable for economic growth,"
the eurozone finance ministers said in a statement after a meeting in Brussels
yesterday, which only repeated their previous words.
The ministers were
attempting to find a common line for the euro zone in the upcoming meeting of
the Group of Seven (G7) leading industrialized countries in Washington next
Ahead of the meeting, Luxembourg's Prime Minister Jean-Claude Juncker,
who heads the eurogroup of finance ministers, said the eurozone would "without a
doubt" step up pressure on finance chiefs from the G7 partners as the euro
hovered around its all- time high against the US dollar recently.
weakened but remained at its record level against the dollar earlier on Monday
on speculation of the outcome of the eurozone finance ministers meeting. It
peaked at a historical high of US$1.4284 last Monday, driven by continued
concerns about the massive US trade and budget deficits, and speculation of new
US interest rate cuts.
Some eurozone countries, led by France and Italy,
stepped up their calls for depreciation, complaining their exports are suffering
and economies are getting hurt.
They had hoped to send a stronger message to
other partners, especially the United States, to curb the appreciation of the
euro, which was virtually a reflection of the continuous weakening of the
However, in presenting their common position for the G7 meeting, the
finance ministers only agreed to say "we have noted with great attention that
the US authorities have reaffirmed that a strong dollar is in the interest of
the US economy."
The tone was obviously much softer than expected.
a lengthy debate," Juncker told reporters after the meeting which dragged into
deep night of Monday due to the sharp difference among member states.
France's call, Germany, the biggest economy in the euro zone and also a G7
member, has been in support for a strong euro.
"I prefer a strong euro,"
German Finance Minister Peer Steinbrueck told reporters on arrival for the
meeting with his eurozone counterparts, making clear his difference with France
The Netherlands and Austria took a similar line with
Dutch Finance Minister Wouter Bos said "the whole idea of the strong
euro means that people have confidence" in the economy and Austria's Wilhelm
Molterer said "the ECB has our full support."
Instead, the finance ministers
unexpectedly singled out China as an easy target, pressing the emerging economy
to do more to make its currency RMB more flexible.
"In emerging economies
with large and growing current account surpluses, especially China, it is
desirable that their effective exchange rates move so that necessary adjustments
will occur," they said.
Juncker said he and President of the European Central
Bank Jean- Claude Trichet, EU Economic and Monetary Affairs Commissioner Joaquin
Almunia would lead a delegation to China for a dialogue on macroeconomic
policies before the end of this year.
On the Japanese yen, the finance
ministers also expressed concerns that it too was undervalued.
"As stated by
the Japanese authorities, the Japanese economy is on a sustainable recovery
path. These developments should be recognized by market participants and be
incorporated in their assessments of risks," they said in the statement.
note that the euro area is playing its role for an orderly reduction of the
imbalances by implementing structural reforms and contributing to a rebalancing
of growth," they added.