Dollar-euro relationship unofficially dominates economic summit

Finance ministers and the heads of central banks from the world’s 20 most powerful nations are in Berlin for a G20 summit where, officially, the euro’s current strength and the dollar’s slide are not on the agenda. But US Treasury Secretary John Snow can expect the Europeans to lobby him over exchange rates.

Analyst with Fortis Bank, Nancy Verret, speculating about possible effects on the currency markets, said: “In the very short term I think it will depend on the outcome of the G20 meeting this weekend, and we expect there will be some kind of general consensus that there is a need for a dollar weakening to solve the huge current account deficit in the US. But I think as well among European policymakers there will be a consensus that there is nothing really to prevent a weakening of the dollar, that it is a necessity.” German Finance Minister, Hans Eichel, has warned that a sharp fall in the value of the dollar against other currencies will damage both US and global economies. Washington shows no sign of wanting to work with Europe and Japan to find a solution. The US Federal Reserve Chairman, Alan Greenspan, told a banking conference in Frankfurt that the US should cut its record budget gap to help narrow the shortfall in its current account. At the same conference, European Central Bank President Jean-Claude Trichet supports one of America’s calls for structural reform in the European Union and the euro zone, which Trichet admits is essential for growth.

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