International Information Programs
Office of Research Issue Focus Foreign Media Reaction

February 13, 2004

February 13, 2004





**  "Fundamental differences" within G-7 prevent "concrete action" on world economy.


**  Europe is "paying the bill" for the U.S.'s "expansionist" fiscal and monetary policies.


**  Asian countries are facing "greater pressure" to revalue their currencies.




Consensus 'far from evident' in G-7--  Meeting in an atmosphere "clouded by the continued drop" in the dollar compared to the yen and euro, the meeting of G-7 finance ministers in Feb. 6-7 "failed to address fundamental imbalances endangering the stability of the global system."  Ministers arrived in Florida "largely in disagreement" about the dangers facing the global economy, noted Italy's leading business daily Il Sole-24 Ore.  "Diverging interests" among the participants left them unable to agree on concerted action and "chiefly for political reasons" they opted for a "propaganda exercise" aimed at influencing markets.  Though their final communiqué called for "healthy" budget policies and "flexibility" in exchange rates, it "was the fruit of intense compromises."  France's centrist, financial La Tribune fretted that the message might be "too subtle" and therefore not have "enough weight in the financial markets."


Dollar's decline a 'threat to the eurozone'--  European dailies complained that "the U.S. government has no interest in strengthening the dollar," leaving the eurozone to "bear the full burden" of the greenback's decline.  Germany's left-of-center Berliner Zeitung labeled the U.S.' "careless dealing" with its currency "disturbing."  Other analysts held that large U.S. budget and current-account deficits showed "America is living beyond its means" and worried "the world economy is heading for a crash" if the U.S. doesn't change course.  Writers agreed that "nothing is going to change" about the "super-euro and mini-dollar" in the near term, with Washington hoping to boost growth with its "cheap currency."  Conservative outlets in the UK took a contrarian view, saying the dollar's decline "should benefit both America and other countries" by helping the U.S. reduce its "vast" current-account deficit.


'Cheap' dollar threatens Asian recovery--  Asian papers questioned if the dollar's decline could be "managed...without major dislocation to the world's economy."  They interpreted the G-7 ministers' call for exchange rate flexibility as "encouragement for Asian countries to let their currencies" trade more freely against the dollar to "ease the pressure on European economies."  The G-7 "made a thinly veiled appeal" for revaluation of the Chinese yuan, judged Hong Kong's independent South China Morning Post.  Singapore's pro-government Straits Times cited "election politics" in the U.S. as the "unseen hand" behind an attempt by the G-7 to "place the burden on China to do its part" in adjusting exchange rates.  Japanese papers feared a rising yen "will hit export-oriented Japanese businesses hard."  Commentators said further declines in the dollar would deal "a serious blow" to Japan's "emerging recovery."  They urged the U.S. to "take concrete action to reduce the deficit and regain" the confidence of global markets.


EDITOR:  Steven Wangsness


EDITOR'S NOTE:  This analysis is based on 32 reports from 15 countries, February 2-11, 2004.  Editorial excerpts from each country are listed from the most recent date.




BRITAIN:  "Let The Dollar Drop"


An editorial in the independent weekly Economist read (2/7):  "The real problem facing the world economy is not suddenly a weak dollar, but a dollar which remains, even after its recent decline, too strong.  The drop in the greenback was inevitable and should benefit both America and other countries, because it will help to reduce America's vast current-account deficit, which is arguably one of the biggest threats to the global recovery....  Europeans, however, complain that the burden of adjustment has fallen disproportionately on their currency, the euro....  The current-account deficit is a direct, arithmetical reflection of insufficient domestic saving.  In particular, America needs to prune its government budget deficit....  America must bear much of the blame for its failure to do anything to curb household and government borrowing and so boost saving....  Sooner or later, though, America will have to face up to its own responsibilities, too."


"Dollar's Threat To Eurozone"


Wolfgang Munchau commented in the independent Financial Times (2/2):  "One question came up again and again at the recent meeting of the World Economic Forum at Davos:  why are the Europeans not more worried about the dollar?...  The truth is that neither the U.S. administration nor the Federal Reserve has the slightest interest in preventing an adjustment process that is ultimately right for the U.S. economy and for the world economy at large....  So why are the Europeans not panicking?  One reason is that the large exporters have hedged their currency exposures, so there is little pressure from the export lobby....  Another reason is that no single individual or institution feels responsible for the eurozone's economic growth....  A sharp depreciation of the dollar would be the kind of shock that could mercilessly expose the weaknesses of the eurozone's system of economic governance."


FRANCE:  "G-7 Crossword Puzzle"


Herve Nathan observed in left-of-center Liberation (Internet version, 2/9):  "The G-7 finance ministers meeting has a tradition:  whatever its result, it invariably concludes with congratulations and messages of self-congratulation on the part of participants....  The one that took place in Boca Raton...did not fail to honor the custom in a situation clouded by the continued drop in the value of the dollar compared to the yen and the euro....  To achieve such unanimity, the drafting of the final communiqué was the fruit of intense compromises among the delegations....  The Europeans had come to Boca Raton with the intention of obtaining a commitment from the United States to reduce its twin deficits (budget and balance of payments), which are causing the threat of a brutal rise in interest rates, and therefore pose a threat to world growth.  The communiqué indeed mentions that 'healthy budget policies are essential'....  [U.S. Treasury Secretary] John Snow [says] the text is 'absolutely consistent with the dollar policy that I have asserted on many occasions.'  Washington, eight months away from elections, will therefore not change its economic policy."


"Things Well Taken Care Of"


Bruno Dranesas commented in centrist, financial La Tribune (Internet version, 2/9):  "The communiqués from the G-7 are documents of prime importance for the financial markets.  They are believed, at least in principle, to give the rules of the game that the seven richest countries in the world intend to follow in order best to promote world growth.  The best way to achieve that is to play as a group, displaying strong cooperation.  The clearer the message, the more the markets know what to make of it.  The greater the political determination, the weaker the temptation of the financiers to go against it.  But, in the Boca Raton case, consensus was far from being evident, so out in the open were the diverging interests for several days.  In an election year, George W. Bush had no reason to stabilize the euro-dollar exchange rate, since the fall of the greenback gives a boost to U.S. growth.  And yet the final communiqué is a clarification that is as unexpected as it is welcome--provided that the words have enough weight in the financial markets.  How are the investors going to read this G-7?...  Is the Boca Raton agreement going to correct the misunderstanding in Dubai?  Will the G-7 communiqué not be too subtle for the markets, which will no doubt regret the absence of a real threat of intervention agreed on by the central banks in case the dollar slips more?  The text has the weakness of being a 'blank' agreement.  But it has at least the merit of being clear.  Will that be enough to convince the markets?"


GERMANY:  "Betting On Tick"


Henrik Mortsiefer editorialized in centrist Der Tagesspiegel of Berlin (2/10):  "Bush is a gambler.  When the President presented his budget draft he provided the conclusive evidence by inviting Americans and the rest of the word to a gigantic bet:  Bet that the government manages to boost the global economy until the presidential election--despite a looted treasury, unbalanced transactions, a weak dollar and miserable ratings?...  Bush thinks and acts in Ronald Reagan's way, which was a mixture of laissez faire and making debts.  The state duplicates its citizens in living beyond the means and taking credits from the next generation--the future taxpayer.  If the Bush government thought about the future at all, then it speculates that the past will recur....  Alarm bells demonstrate that the U.S. economy can less and less rely on its own curing powers.  If investors lose confidence in the sustainability of U.S. fiscal policy, the calculation of the debtor in the White House will no longer work.  Capital, which is financing the current account deficit, would go to different regions and also Europe had to scrap its recovery hopes.  The dollar would further fall, exports lose U.S. markets, and the stock market would be in turmoil.  The American dream would turn into a global nightmare.  But fortunately the bet is looking good for the president.  The economy is growing, stocks are rising, the dollar is helping U.S. companies more than it is causing damages.  But even if the debt policy will not cause the finance system to collapse, the dangers are looming."


"Small Ray Of Hope"


Center-right Frankfurter Allgemeine argued (2/9):  "All those members of the G-7, who had come to Boca Raton hoping that the finance ministers and central bank chiefs agreed on a coordinated exchange rate policy were disappointed....  But the European finance ministers can consider it their success that the meeting described 'excessive volatility' and 'uncoordinated movements' of exchange rates as not desired.  By doing so, the G-7 showed consideration for European concerns over allegedly negative consequences of strong ups and downs of exchange rates and a continued strength of the euro....  But we can certainly consider the meeting as disappointing with respect to promises that were made to strengthen economic growth.  They do not go beyond the things what has been included in the various finance and economic policy agendas.  U.S. Treasury Secretary Snow, for instance, reiterated the intention to halve the U.S. budget deficit within the coming five year."


"Now the Central Bank Must Step In"


Carsten Broenstrup contended in centrist Der Tagesspiegel (Internet version, 2/9):  "At first glance, what the seven most powerful finance ministers of the Western world wrote down at their meeting in Florida looks spectacular.  They warn in their declaration against 'disorder' and 'exaggeration' on the currency markets.  With such drastic vocabulary they will at best slow down, but not stop, the dollar's exchange rate decline.  Yet since the beginning of 2002, the losses of the U.S. currency to the euro add up to 29 percent--that greatly worries above all export-oriented German industry.  It could hardly be expected that the G-7 finance ministers would come to more agreement.  The interests of the three large currency blocs, the United States, Japan and Europe, lie too far apart.  The United States hopes, in the year of presidential elections, to stabilize its unstable recovery with a cheap currency.  The Japanese do not want have their timid economic recovery destroyed by revaluing the yen to the dollar--and try to support the dollar with currency sales....  Thus the euro must bear the full burden of the dollar's downward pressure.  Yet the price rise of the common currency is becoming a danger for the business climate there.  To reach a more orderly development of currency rates, the G-7 countries would have had to threaten the financial markets that, if necessary, they would jointly resist a dollar decline.  That came to naught--so now the European Central Bank must step in with a currency intervention or a lowering of the interest rate.  That is the last hope for Europe."


"Europe All Alone"


Marc Hujer judged in center-left Sueddeutsche Zeitung of Munich (2/9):  "More than other national economies, the U.S. economy is dependent on international investors to finance its constantly growing budget deficit.  That is why it is not surprising that the Americans accepted the European wish to include a passage in the final communiqué that condemns extreme exchange rate fluctuations.  This is to reassure the finance markets and prevent a drastic increase in the euro....  This is a great success, mainly of the Europeans.  But it is only a success for a brief period of time.  The G-7 meeting in Boca Raton was unable to hush up the contradicting interests between European s and Americans.  Each side is interested in not making one's own currency too strong....  It is not the low dollar exchange rate that is worrying the Americans, it is not rising inflation, and they obviously think that confidence in the dollar continues to exist....  But in the end, the Europeans will again be left in the lurch as the ones who suffer the most from a declining dollar exchange rate....  The Europeans can now only help themselves.  They must now search for ways and means to protect themselves from declining dollar exchange rates.  The G-7 meeting in Boca Raton did not change this."


"The Entire World Pays For It"


Stephan Kaufmann wrote in left-of-center Berliner Zeitung (2/6):  "G-7 ministers will not be able to compromise in favor of a stronger dollar.  As a result the dollar will remain weak, which will make Europe and Japan unhappy; not just because exports hopes falter.  The careless dealing of the U.S. with its currency is disturbing.  The surging deficit causes the dollar to fall.  As long as the U.S. relentlessly uses the world dominance of the dollar to take up money for its war on terror, the financial markets are shattered and dollar assets devalued around the world.  With this devaluation, the U.S. forces the entire world to pay for the war."


"No Miracle In Boca Raton"


Torsten Riecke editorialized in business daily Handelsblatt of Duesseldorf (2/4):  "The Europeans hope that the Americans will stop the fall of the dollar and that they finally reduce their deficits.  But the U.S. government has no interest in strengthening the dollar nor is it willing to allow anybody to tell it what it has to do.  There are elections in America.  In this situation, everything that could disrupt the picture of a healthy economy is swept under the carpet.  Japan will stay out of this dispute and prevent its currency from being evaluated...and China, the other great manipulator of the currency system, is not even sitting at the negotiating table."


"The Rhetoric From Boca Raton"


Lucas Zeise noted in business daily Financial Times Deutschland of Hamburg (2/4):  "Act stupid, this is often a wise tactical maneuver.  It is likely that Treasury Secretary John Snow will resort to it when he meets his colleagues from the other big industrialized nations in pelican-infested Boca Raton....  Snow will again simply repeat the litany of the strong dollar....  The lack of interest of the U.S. government in stabilizing the dollar exchange rate has not changed....  The domestic situation in the United States and the objective fact of a current account deficit that is going rampant are two strong arguments why a reverse signal will not spring...for the foreign exchange market."


"The Debt President"


Washington economic correspondent Marc Hujer filed the following editorial for center-left Sueddeutsche Zeitung of Munich (2/3):  "There are limits for the deficits.  As far as politics is concerned, because state expenditures cannot satisfy all people; as far as the economy is concerned, because the economy can balance debt only to a certain degree....  Already now America is living beyond its means, be it the high indebtedness of the consumers, be it trade with the rest of the world....  We do not have to be too pessimistic to come to the conclusion that the global economy will be heading for a crash if the United States continues its debt policy unimpeded....  Bush is not worried about the deficit.  It is evidence of the fact that George W. Bush takes action, that he, unlike his father, thinks of those who are disadvantaged.  If the economy goes along until with such policy to the election day, his deficit could even be a secret trump card."


ITALY:  "An Out-of-Tune Concert"


Enzo Grilli took this view in leading, business daily Il Sole-24 Ore (2/8):  "Europe and the United States have indulged together in turning a blind eye to exchange rates, the former allowing the euro to appreciate without stepping in, and the letter letting the dollar depreciate with apparent unconcern.  The result is that the U.S. currency has lost 40 percent of its value against its European counterpart since the beginning of 2002.  Only recently has ECB [European Central Bank] Governor [Jean-Claude] Trichet come round to describing this exchange rate shift as 'drastic.'  Before that, the pretense of not seeing was kept up....  It naturally suited Europe for the United States to be pulling economic recovery along, but the bill for highly expansive U.S. fiscal and monetary policies has promptly been presented to Europe in the form of a dollar continually losing value, primarily against the euro....  The ministers thus came to the meeting in Florida largely in disagreement as to the diagnosis of the dangers faced and...with the Americans and Europeans reluctant to adjust their interest stabilize the euro-dollar rate and to maintain stability and confidence on the financial and currency markets....  The only alternative to action, as regards both rates and some form of concerted intervention on the exchange markets which was apparently too hard to agree on, chiefly for political reasons, was to attempt to influence the markets via a propaganda exercise, reiterating confidence in a process of orderly adjustment of the current basic deficits....  Lastly, a glimpse could be given of the possibility of direct intervention on exchange rates should it prove necessary, in the hope that all this could be done in the right ways and without a repetition of the Dubai fiasco.  The likelihood of doing anything (more) useful was and remains low.  Trotting out facts and intentions makes a limited impact on the markets, especially if the former are common knowledge and the words uttered about the intentions disguise the disagreement, not the agreement among those uttering them.  They must be followed by action, embarked upon in good time and with credible tools suited to the purpose.  The former always come cheaper than the latter, but they are also far less useful, and the same applies to the communiques issued by the ministers of the seven major countries."


"The G-7’s Message To Market Test"


Stefano Trincia noted in Rome's center-left Il Messaggero (2/9):  “The Boca Raton compromise is heading for its most important verification, the market one.  The prospects, in light of what emerged at the conclusion of the G-7 summit, do not seem to indicate a substantive change in course in the exchange rate between the mini-dollar and the super euro.  Despite the fact that the summit’s final document explicitly cited the risk of an 'excessive volatility’ and of a 'disordered movement' in the purchase of the currencies...investors and speculators could decide today to ignore the warning on the re-opening of negotiations and to continue to aim at the weakening dollar by causing a further decrease in its value.”


"U.S., The Eternal Locomotive With Fewer Gears"


Eugenio Occorsio opined in left-leaning, influential La Repubblica (2/9):  “As is assured in all the economic circles of the planet, 2004 should be the first year in a new growth era.  But in truth, at the first G-7 summit of the year, in Florida, there was not much room for reciprocal reassurances:  the currency tensions are too high, the gap relative to the growth rates are still too wide....  Of the three areas in the world, the U.S. heads the positive economic trend, where the domestic situation is becoming stronger.  This weekend the president of the Federal Reserve, Alan Greenspan and Treasury Secretary John Snow faced a diplomatic offensive on the part of the allies who were asking for a slow down in the dollar’s decline....  Economists agree that things are looking brighter.  Does this mean that it will be plain sailing?  Certainly not....  Among the most worrying factors is the budget bill 2004 announced by President Bush.”


RUSSIA:  "Big Seven Have Released Euro And Dollar Into Free-Float"


Natalya Orlova and Alexei Tikhonov commented in reformist Izvestia (2/9):  "Finance ministers of leading economic powers attempted to solve the fate of the dollar and the euro.  G-7 countries tried to force the U.S. to watch over the rapidly falling rate of the dollar.  As a result the leaders agreed that the correlation of the rates of the currencies (the dollar, the euro and the Japanese yen) will reflect real market indicators.  In reality this means that the rate of the principal world currencies will still remain difficult to control....  It is not worthwhile to exaggerate the likelihood and the market force of (any) interaction.  The problem lies in the fundamental differences of major economic blocs in the world, which previously were ironed out because of a more global East-West confrontation.  In reality, however, the future of the dollar and the euro will depend on the situation of the U.S. budget and the progress in economic restructuring in Old Europe."


"Alexei Kudrin Was Repaying Debts In Florida"


Pyotr Netreba and analyst Sergei Minayev said in reformist business-oriented Kommersant (2/9):  "Thus, unlike the meeting in Dubai, the G-7 meeting in Florida ended in a situation when, despite all the foreign economic problems of the United States the dollar vis-a-vis the euro is not expected to lower any more--Europe will not countenance this."


AUSTRIA:  "The World Of Exchange Rates"


Miriam Koch held in centrist Die Presse (2/9):  “This weekend, the Finance Ministers and currency guardians of the seven largest industrial nations met in Florida, and yesterday announced the result of their deliberations: a joint warning of excess volatility on the currency markets.  So what does that mean?  That the euro is going to stop its rise?....  Well, the fact that this formulation was included in the final statement of the meeting will at least bring about a short pause on the currency markets.  In the medium term, however, nothing is going to change about the weak dollar and the strong euro.  Despite their unanimous words, the conflicts of interest among the seven giants mean that they are really a long way away from taking joint action to stabilize the exchange rates.”


NETHERLANDS:  "Boca Raton"


Influential independent NRC Handelsblad editorialized (2/11):  "Who will pay the bill for America's overspending?  That was the most important question at the G-7 meeting in Boca Raton, Florida.  The finance ministers and central bankers of the seven largest industrialized countries could not come up with an answer to this question....  No wonder.  First of all, the American government hardly has the need to take any measures until the presidential elections and secondly, important countries [such as China] were not represented at the meeting....  Budget deficits stimulate economic growth and that is good.  But deficits covered by foreign creditors will sooner or later reach a critical limit--even when it concerns the U.S."


TURKEY:  "Cheaper Dollar Serves Turkey's Interests As Well"


Gungor Uras observed in mass-appeal Milliyet (Internet version, 2/9):  "It has become clear once again that economic growth is the priority of the United States at least until the presidential elections....  For this reason, the United States does not want to stop the depreciation of the dollar....  The latest G-7 summit was a 'meeting of weeping' for the European G-7 members.  The European countries are complaining against the depreciation of the dollar, because...the prices of European products...are (relatively) rising as a result of the depreciation of the dollar.  While U.S. firms are selling their products abroad, the European firms are finding it difficult to export their products....  Presently countries other than the United States are unable to stabilize the prices of their own currencies by purchasing and selling dollars from the markets....  European countries whose currencies appreciated against the dollar...hope that the United States would once again render the dollar attractive by raising the interest rates on the dollar....  The United States, on the other hand, is pleased with the situation, because the depreciation of the dollar does not harm the economic situation of the U.S. ...  Lower interest rates are granting new employment opportunities [and]...increasing the amount of investments and production; securing economic growth; paving the way ahead of more exports; preventing the flow into the country of foreign products, which have become more expensive...and is weakening the financial structure of rival countries and foreign export firms....  We may deduce from all these developments that the U.S. administration is not considering (for the time being) taking any action for appreciating the dollar or raising the interest rates....  Turkish exporters initially complained against the cheaper dollar rates.  However, these exporters are not making any noise now, because the dollar rates are stable against the [Turkish] lira....  Moreover, most of the Turkish exports are now being made in euros."




CHINA:  "Time For Plain Talk On Trade"


Zhu Qiwen commented in the official English-language newspaper China Daily (2/3):  “The United States is apparently determined to insist that China has not adequately fulfilled its commitments to the World Trade Organization (WTO), even though it has become the world's fourth largest trading power thanks to robust growth over the past year.  Meanwhile, a recent Chinese report on U.S. trade policy indicates the world's largest economic power has failed to practice what it preaches about free trade.  For a developing country like China, a total annual foreign trade volume...(of) about 60 per cent of its gross domestic product...offers ample testimony to the nation's commitment to opening up.  Despite that, the office of United States Trade Representative criticized China's WTO compliance in its annual report to the U.S. Congress in December....  However, in light of China increasing access to its fragile banking sector for foreign competitors and voluntarily slashing export tax rebates in 2003, the U.S. criticism is unfounded....  Meanwhile, a report released by China's Ministry of Commerce last month indicated that rising protectionism in the United States has become a serious cause for concern, especially regarding trade relations between the two countries.


“As a major player in global trade, the United States has made significant contributions to international trade rules and garnered many benefits from those rules.  Nevertheless, to revive the American economy, the U.S. administration has adopted more and more protective measures in recent years.  This has sent out mixed signals over its commitment to the WTO free trade agenda....  In a sense, such protective practices have severely undermined international momentum and confidence to promote the WTO's efforts to give developing nations a larger share of trade benefits. ...  Though China agreed the United States can maintain its anti-dumping measure for 15 years after China's admittance to the WTO, the remarkable development of China's market economy is an undeniable fact....  The two reports have shed some new light on each country's trade policies, but it is important to ensure they are properly interpreted in order to enhance mutual understanding of the importance of this bilateral trade.”


CHINA (HONG KONG SAR):  "G-7 Must Put Its Own Finances In Order"


The independent English-language South China Morning Post editorialized (2/9):  "In Dubai, the U.S., facing growing trade deficits, was calling for redress through exchange rate adjustments.  Amid the latest group gathering, the American economy is growing again and the Bush administration, running for re-election, is happy to see continued weakness in the dollar as this boosts exports.  This time, it is the Europeans, with a currency that has risen 30 percent against the U.S. dollar over two years and whose goods are now more expensive in both America and Asia, who are seeking relief.  They point to a ballooning U.S. budget deficit that is exacerbating the imbalances, but little is likely to happen on that front for the next year....  What does all this mean for the mainland and the rest of Asia?  For one thing, there could be renewed calls for Asian currencies to rise, this time to ease the pressure on European economies.  As has been widely expected, the statement about currency flexibility was repeated, and will likely be seen as encouragement for Asian countries to let their currencies trade more freely against the U.S. dollar....  In the meantime, the best course for G-7 countries would be to put their own fiscal houses in order."


"G-7 Issues Veiled Call for Yuan Adjustment"


Andrew K. Collier wrote from Beijing in the independent English-language South China Morning Post (2/9):  "The G-7 grouping of rich countries...made a fresh if thinly veiled appeal for a yuan revaluation after a mainland business newspaper said the currency could be revalued as soon as next month....  After a two-day meeting...the G-7 adopted a communique saying 'more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility.'...  There was little doubting that the statement targeted Asian countries....  The mainland anchors the yuan near a rate of 8.28 to the U.S. dollar.  Other countries in the region, including Japan, have been aggressively intervening in foreign exchange markets to slow the rise of their currencies against the U.S. dollar to maintain the competitiveness of their exports....  The G-7 communique adds to the growing pressure on Beijing to revalue the yuan at a higher level against the dollar."


"Resourceful China Missing From G-7 Show"


Graig Stephen maintained in the independent English-language South China Morning Post (2/7):  "This weekend's G-7 meeting in Boca Raton, Florida, again sees finance ministers of the leading industrialized nations gather to dissect the increasingly imbalanced-looking global economy and dysfunctional currency markets.  While the Bush administration publicly vacillates over whether it has a flexible or strong dollar policy, the trend so far has been unequivocally down.  The question is whether its decline can continue to be managed down without major dislocation to the world economy....  China, so inextricably connected with its dollar peg and bilateral trade with the U.S., is absent.  After all, if China was guilty as charged with exporting deflation, could it not also be a future exporter of inflation?  China's contentious currency peg to the greenback has meant that not just its exchange rate, but also its monetary policy is abdicated to the U.S. Federal Reserve--an agreeable state of affairs that led corporate America to outsource manufacturing en masse....  Inevitably, analysts and traders will dissect and second guess the G-7 communiqué after the meeting in Florida.  But perhaps it is not these central bankers one should be paying attention to, but the ones at the People's Bank of China.  If China can export deflation, drive up commodity prices and mop up excess U.S. government debt, perhaps it can also drive up inflation or even interest rates?  Maybe not today, but sometime soon."


JAPAN:   "Measures Should Be Taken To Prevent The Dollar's Fall"


The top-circulation, moderate Yomiuri editorialized (2/10):  "A joint statement issued by G-7 finance ministers...appears to be helping by temporarily halting speculators' dollar-selling offensive, but not particularly effective in reducing market pressures for U.S. dollar depreciation.  The dollar's continuing fall against the yen and euro, if prolonged, will hit export-oriented Japanese businesses hard, dealing a new serious blow to the emerging recovery of the Japanese economy.  A delay in the recovery of Japanese and European economies will eventually have a negative effect on the U.S. economy and limit Japan's future market intervention to stop the dollar's slide.  The GOJ should work with the U.S. and Europe to prevent the dollar's further fall.  If exchange rates are not stable, steady world economic growth cannot be achieved."


"Risky Mutual Monetary Dependence Must End"


The liberal Asahi editorialized (2/10):  "Finance ministers and central bank governors of the Group of Seven (G-7) industrial nations gathered...amid mounting international tension over the dollar's continued freefall.  The leaders issued a joint statement, a document that appears to be a political compromise....  Market players find nothing in the communique that suggests any significant change in Washington's policy of allowing the dollar to trend downward gradually.  Most investors are betting on a continued weakening of the U.S. currency in coming months.  Obviously, the top G-7 economic policymakers failed to dispel fears about a possible crash stemming from the towering U.S. twin deficits:  budget and current accounts.  They have merely put off wrestling with the problem in earnest....  Meanwhile, complaints have grown louder and more intense in Europe, which is bearing the brunt of the effects of a weaker dollar.  There is also a limit to Japan's ability to support the dollar with heavy intervention.  Japan and other countries in Asia that have a large trade surplus with the United States are, in effect, financing the U.S. budget deficit by buying T bills.  But this can be seen as unhealthy mutual dependence.  It is doubtful whether this risky arrangement can go on for long.  In this sense, the G-7 statement's comment that 'sound fiscal policies over the medium term are key to addressing global current account imbalances' is a mild warning about the U.S. twin deficits....  Japan must make more efforts to engineer an economic recovery driven by domestic demand so that its economy can grow without depending on exports. At the same time, the United States should also make serious efforts to trim its fiscal deficit for the sake of stability in the world economy."


"Fall Of U.S. Dollar"


Business-oriented Nihon Keizai declared (2/6):  "Although the world economy is making a steady recovery, there are concerns over fluctuations on exchange markets....  Japan, which is showing signs of economic recovery due to a steady rise in exports, is engaged in massive market intervention to stop the yen's rapid appreciation.  The weakness in the U.S. dollar stems from global concern over U.S. account and budget deficits.  The Bush administration has announced a goal to halve the U.S. budget deficit in five years.  It is imperative that the USG take concrete action to reduce the deficit and regain global confidence."


SINGAPORE:  "The Money-Go-Round"


The pro-government Straits Times editorialized (2/11):  "Exporters in Asia should have known better than to look for clear leads from the Group of Seven (G-7) finance ministers' meeting....  Market watchers would have known after the last G-7 meeting in Dubai that the grouping would do little to halt the U.S. dollar's fall and, instead, place the burden on China to do its part in exchange rate 'flexibility'.  Election politics in the United States was the unseen hand.  But China's imports account for only 1 per cent of world output!  That Dubai meeting was in September.  In the months since, the linkage between the U.S. dollar's purchasing power and the fortunes of the incumbent president in election year has become rather like policy, although it would never be acknowledged.  For President George W. Bush, the strongest argument he can mount against the surging Democrat challenger John Kerry is in the area of jobs.  Cheapening the dollar helps exports and keeps the factories at full tilt.  That would keep workers happy.  U.S. Treasury Secretary John Snow all but signaled at the G7 meeting he was content to let the dollar keep sliding....  This is where the G-7, in the Florida session at least, has failed to address fundamental imbalances endangering the stability of the global system.  Thanks to the cheaper dollar the U.S. is growing at about 4 per cent....  But Europe's growth is at risk.   Japan's recovery can be switched off if its leaders cave in to pressure over the yen.  China is going great guns at about 9 per cent but, as noted, its share of world trade is smaller than imagined.  The G-7 ministers indeed can support their contention that global recovery has strengthened.  How they would 'cooperate as appropriate' and monitor the rates for long-term stability is the question to ask."




INDIA:  "Why The Dollar Should Fall"


Chennai-based financial daily Business Line remarked (2/11):  "The declining fortunes of the dollar is becoming a global concern.  The U.S. is earning less from exports than it needs to pay for her imports.  The U.S. trade- and budget-deficits are increasing.  The dollar has been falling while the euro, the yen and the rupee are rising.  There is a possibility that this may lead to dumping of dollars in a big way and bring the U.S. economy down.  Many developing countries are dependent on the U.S. market.  The U.S. economy will pull down these countries along with it.  Thus, it is being said that the whole world, in its own self-interest, should rescue the dollar by continuing to buy it ....  The U.S. is like a buyer asking for more supplies against a check which should not be presented for payment.  It will obviously be better to sell the goods to another buyer at lower price but whose check is good.  But, then, if the businessman stops selling to the dubious buyer and does not find another buyer then he is in trouble.  It follows that the rest of the world should develop other markets instead of continuing to buy U.S. T-Bills of dubious value and exporting to the U.S.  The problem is that other countries do not have an America-like appetite of making huge borrowings to import and consume goods from across the world....  The real concern is that U.S. hegemony will be broken with the fall of the dollar.  Thus, a false propaganda is being made that it is necessary for the rest of the world to buy dollars for stability and growth.  The truth is that the collapse of the dollar and the U.S. economy can lead to better standards of life for our people and also create a multipolar world."


"Back To Table"


The Deccan Herald commented (2/9):  "There seems to be a welcome willingness to resume the stalled WTO negotiations.  The growing realization among important countries of the need to resume the World Trade Organization (WTO) talks, that collapsed in Cancun last year, is a healthy development....  The Cancun talks collapsed as the draft resolution did not reflect the concerns of many developing and least developed countries.  Now the challenge is how to arrive at a consensus.  There are indications of the willingness, of the parties concerned, to negotiate....  Many countries feel that there is an urgent need to move ahead with negotiation in services and non-agricultural market access....  Since success is dependent on the principle of give and take, developed and developing countries must strive to put in place a new global trade regime that will accommodate the legitimate concerns and aspirations of all countries.  Considering the complexities of the issues involved, it is a difficult task.  The challenge lies in trying to evolve a system, which should appear to be fair and reasonable as far as possible."




CANADA:  "It's Time To Admit China To The Club"


The business-oriented Financial Post opined (2/9):  "As Group of Seven finance ministers emerge from two days of talks in Florida on Saturday to try to prevent the slide in the U.S. dollar from turning into a full-blown currency rout, it is hard not to get the feeling this exclusive club of the world's richest countries is heading into its twilight years."


ARGENTINA:  "A Fearful Future"


Claudio Mario Aliscioni, leading Clarin economic columnist, wrote (2/3):  "When George W. Bush took office...he had a huge fiscal surplus at his disposal....  A red light quickly appeared in budget figures thanks to a controversial tax reduction that benefited the rich, mostly.  Shortly ago, the IMF warned the White House that it must cut back the fiscal as well as the trade deficit.  This is a sensible concern.  The U.S. is financing its deficit via foreign capital.  For the time being, no one dares to imagine the possible consequences if this capital decides to withdraw."



Commentary from ...
Middle East
East Asia
South Asia
Western Hemisphere

This site is produced and maintained by the U.S. Department of State. Links to other Internet sites should not be construed as an endorsement of the views contained therein.

Back To Top

blue rule
IIP Home  |  Issue Focus Home