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No attempts to boost falling dollar Original Source Link: (May no longer be active)
http://www.miami.com/mld/miamiherald/news/politics/7889515.htmhttp://www.miami.com/mld/miamiherald/news/politics/7889515.htm
Posted on Fri, Feb. 06, 2004
U.S. Shuns Calls to Boost Falling Dollar
MARTIN CRUTSINGER
Associated Press
BOCA RATON, Fla. - The Bush administration, hoping to reverse the loss of 2.8 million U.S. manufacturing jobs since mid-2000, is resisting pressure from its European allies to step in and halt a steep slide in the value of the U.S. dollar.
While the greenback's drop to record lows against the euro, the common currency of 12 European countries, is causing economic heartburn among European executives faced with increased competition from now cheaper-priced American goods, it is bringing hope of an export revival to beleaguered American manufacturers.
The sagging dollar and America's soaring trade and budget deficits were expected to be top discussion topics as U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan serve as hosts for a two-day meeting of America's major economic allies at an exclusive Florida resort.
The top finance officials of the United States, Japan, Germany, France, Britain, Italy and Canada - the so-called Group of Seven countries who meet four times a year to assess the global economy - were also scheduled to hear firsthand reports from their counterparts in Iraq and Afghanistan on efforts to revive those two war-torn economies.
Before the formal discussions began with a dinner Friday night, Snow held a series of one-on-one meetings Friday with finance officials from Britain, the European Central Bank, Canada, Germany and France.
The Bush administration got some good news before the talks began when the government reported that the U.S. unemployment rate fell to 5.6 percent in January as businesses added 112,000 jobs to their payrolls.
But even with the January increase, President Bush has still seen 2.1 million jobs disappear since he took office. Snow said in a statement that the president "will persist in his efforts to drive economic growth and job creation until every American looking for work can find a job."
Going into the Group of Seven finance meetings, European officials had hoped to get a change in the wording of the final communique that would signal to currency markets that if the dollar declines too far in value, the G-7 countries would consider intervening jointly in currency markets to drive the greenback up in value.
But Bush administration officials contend the answer to Europe's growth problems is not boosting exports at the expense of American companies but a pursuit of policies to rid Europe of structural impediments that are holding back domestic growth.
Asked earlier this week about European complaints, Snow gave no hint that the administration was prepared to change its policy, arguing that the dollar's value should be set "in open competitive markets." He said the administration continued to believe that "flexibility" in currency rates was important because that was the best way to allow for necessary adjustments.
While Snow didn't say which adjustments he was referring to, many economists believe the only way to solve America's soaring trade deficit is to allow the dollar to weaken further in value, making U.S. manufactured goods cheaper on foreign markets and more competitive at home against imports, which will be more expensive as the dollar weakens.
The Coalition for a Sound Dollar, representing 96 U.S. exporting groups, sent Snow a letter this week urging him to stand firm against European pressure on the currency issue, calling it "imperative" that the administration continue to push for the dollar's value to be set without government intervention.
While the dollar's decline over the past two years has been orderly, some economists worry that the situation could worsen into a free-fall that would spook foreign investors into dumping their considerable holdings of U.S. stocks and Treasury bonds.
The administration also was prepared to defend its budget policies during the G-7 talks. The administration on Monday unveiled a new budget that included a projected record deficit of $521 billion for the current year but projected the deficit would be cut in half in five years.
The G-7 finance ministers and central bank presidents were also scheduled to meet with their counterparts from Iraq and Afghanistan to discuss assistance. The G-7 nations, including France and Germany which opposed the U.S.-led Iraq war, have pledged debt relief for Iraq's more than $120 billion foreign debt, but the amount has yet to be negotiated among creditor countries.
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