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Germany warns bush over dollar weakness { February 26 2004 } Original Source Link: (May no longer be active)
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Schröder set to warn Bush over dollar weakness
By Bertrand Benoit and Quentin Peel in Berlin
Published: February 26 2004 4:00 | Last Updated: February 26 2004 4:00
Gerhard Schröder, the German chancellor, is to raise the issue of the dollar's weakness against the euro with George W. Bush, the US president, tomorrow.
In a Financial Times interview ahead of his visit to the US, he said the current exchange rate was "not satisfactory".
He stopped short of calling for any joint intervention to stabilise the euro-dollar exchange rate, but he said Europe and the US shared a "common responsibility" for the world economy.
Mr Schröder said the European Central Bank must be considering further action to lower interest rates in response to the US currency's continuing decline. He said he accepted the president's repeated declarations that the administration is not pursuing a deliberate weak dollar policy.
"The dollar-euro exchange rate, at least for the Europeans, is not satisfactory," he said. "Only the central banks are in a position to change that, and I do not want to interfere in the policies of the US Federal Reserve. That is a matter for the Americans.
"I would just say that I believe the European Central Bank has recognised that this relationship between the euro and the dollar is not helping the export sector, to put it very mildly. I can imagine that as a result, with all due respect for the independence of the ECB, there will be some consideration about whether [euro] interest rates are at the right level."
Mr Schröder's comments followed earlier remarks in Tokyo yesterday by Horst Köhler, managing director of the International Monetary Fund, who said Japan's massive intervention in the foreign exchange markets to slow the yen's rise against the dollar was a "pragmatic" policy that had helped the economy and the fight against deflation.
Concerted action to influence exchange rates would contradict US policy. The US administration has consistently argued that open markets are the best judge of currency values. It agreed during this month's meeting of the Group of Seven countries to address European concerns about excess volatility in currency markets. But the US thinking coming out of the meeting was that there was no change in the hands-off stance.
Differences over the dollar-euro exchange rate could cast a shadow over what is intended to be an important visit in repairing relations between the US and Germany, damaged by their disagreement over the war in Iraq.
Economic ties will be a significant theme of the chancellor's visit, which starts today in Chicago.
Mr Schröder was at pains to insist that the atmosphere between the two had improved, although neither sought to deny their differences over the need to go to war.
He said Germany was ready to back "substantial" debt relief for Iraq, to be negotiated in the Paris Club of government creditors, and involving partial write-off of debt and rescheduling.
Germany will also start training Iraqi policemen in mid-March, although this will take place outside Iraq. Mr Schröder said his government remained opposed to sending troops to help the peacekeeping operation inside the country.
"The American government knows precisely where we stand, and is also very well informed about the fact that such questions face extraordinary resistance in the German parliament," he said.
Mr Schröder denied his visit might be used by Mr Bush to bolster his campaign for re-election. "I think it would be exaggerating the importance of the German chancellor to suggest it might have an effect on the election one way or another," he said.
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