The Bush administration came under fire at the start of the two-day meeting of the Group of Seven (G7) industrialised nations yesterday over the declining dollar and the US's surging budget deficit.
The United States is not, however, expected to give any ground on either issue, and is pressing finance ministers from Europe and Japan to speed their own economic growth. The US dollar slumped again as the meeting of finance ministers and central bank chiefs representing the US, Japan, Canada, the United Kingdom, France, Germany and Italy got under way at the exclusive Palm Beach county resort of Boca Raton.
Last night in New York the euro was trading just below $1.27, within striking distance of its all-time high of just over $1.29.
The renewed dollar weakness was partly on low expectations that anything would be done to address the greenback's slide, and partly because of US employment data issued yesterday that did not live up to expectations. The feeling among euro-zone ministers that they cannot win has created a tense mood at the summit, which is being chaired by US Treasury Secretary Mr John Snow and the chairman of the Federal Reserve, Mr Alan Greenspan.
A team of EU observers is also attending, including the Minister for Finance, Mr McCreevy, as representative of the European presidency. "The moment has come for the strong voice of the euro group to express itself," said French Prime Minister, Mr Jean-Pierre Raffarin.
The French Treasury Minister, Mr Jean-Pierre Jouyet, said on Wednesday that it would not be the "easiest" G7 he has known.
Germany, France and Italy are making the case that the US's low interest rates and high public spending have caused the soaring US trade and budget deficits, and that it should increase its interest rates rather than the EU zone lowering theirs. The US is officially committed to a strong dollar but Mr Snow is not yielding to the Europeans' chiding that the high euro will dampen EU growth by hitting exports and that the US should curb its rising indebtedness to the rest of the world.
US economists say there is little prospect of the administration reining in spending with an election coming, even though trade and budget deficits together could approach 10 per cent of gross domestic product. The Bush administration has seen exports shoot up by 19.1 per cent in the last quarter of 2003 and wants to keep the momentum going to make up a shortfall of 2.1 million jobs since 2000.
Federal Reserve governor Mr Ben Bernanke said the declining dollar would, over time, strengthen exports and help the US recover some of its trade deficit and add jobs.
The US unemployment rate dropped to 5.6 per cent in January, its lowest level in two years, but the addition of 112,000 new jobs fell short of expectations of 150,000.
Mr Snow said that the president "will persist in his efforts to drive economic growth and job creation".
Mr Fred Bergsten, director of the Institute of Economic Development in Washington, said the US wanted a "continuing, gradual, orderly decline in the dollar and the Europeans want to stop the rise in the euro".
A spokesman for Mr McCreevy said that he had endorsed the position of the European Central Bank of the "undesirability of volatile exchange rates".
French Minister for Finance, Mr Francis Mer, said the G7 ministers needed to revise the G7 message, as financial markets misunderstood their communiqué at the last G7 gathering in Dubai, which called for flexible exchange rates.
This was aimed at Japan, which has bought dollars to keep the yen down, and China, whose exports have benefited from its peg to the dollar.
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