View Full Version : Germany Urges U.S. to Reduce Deficit

Mac Seafraidh
Friday, January 28th, 2005, 11:19 PM
Associated Press
Update 2: Germany Urges U.S. to Reduce Deficit
01.28.2005, 12:18 PM

Another call for the United States to reduce its deficit and halt the dollar's drop came Friday, even as a top bank official said financial markets were putting too much focus on the currency's decline.

Germany's Economic and Labor Minister Wolfgang Clement reiterated cries for the Bush administration to reduce the deficit and halt the dollar decline that has slowed his country's export-driven economy.

"The U.S. must develop a policy on reducing their deficit," he said during the World Economic Forum, adding that Japan and China should adopt more flexible policies toward the dollar as well.

The United States' ballooning trade and budget deficits have been blamed for the dollar's recent decline against the euro and the yen - a situation some observers believe the U.S. government is content with because it makes U.S. exports cheaper.

European leaders have also called on China to loosen its tight currency controls and prepare to gradually phase out its fixed exchange rate system, which has the yuan linked to the dollar. This policy means that the euro, and not the yuan, has shouldered the brunt of the dollar's decline.

Clement's call came a week ahead of the Group of Seven leading industrial nations' meeting in London, where policymakers are expected to discuss the dollar's weakness.

Clement has repeatedly stated that excessive weakness in the U.S. dollar is of concern because a strong euro makes German goods less price-competitive on markets outside the euro zone.

The U.S. dollar fell slightly against the euro Friday as the 12-nation currency changing hands at US$1.3056 in afternoon trading in Europe, up from US$1.3040 late Thursday in New York. The dollar was stronger against other rivals, with the British pound down at US$1.8859 compared with US$1.8886 on Thursday and the dollar buying 103.16 yen, up from 103.03 the day before.

Earlier Friday, Bundesbank President Axel Weber said financial markets were putting too much focus on the declining dollar.

"The dollar foreign-exchange rate is the wrong focus, we should focus on effective exchange rates and bilateral exchange rates," Weber said after a luncheon at the World Economic Forum.

He noted that since 1999 Germany has gained 6 percent in price competitiveness compared with the rest of the euro zone. Italy, by contrast, has lost 12 percent.

"We talk too much about the loud exchange rate, and too little about the real, quiet exchange rate. That's the one that really matters," he said.

Weber, a member of the European Central Bank governing council, noted that the ECB plans to publish a paper discussing the discrepancies within the euro zone next month.


Bush cannot spend his cash on security within the nation. He to waste the United States's cash on Israel's war. For Dubba-Ya, it is Israeli and the Mexican people. Let's let them have guest passes.(like Schroeder's plan of assimlating Germany with Turks) W Bush wants a US of Texico.