America vetoes G7's dollar alert
Edmund Conway In Washington
Last Updated: 12:10am BST 21/10/2007
European finance ministers this weekend failed in their bid to slap down the United States for allowing the dollar to plunge to record lows against the euro.
US Treasury Secretary Hank Paulson vetoed French, Italian and German proposals to use the final statement from the Group of Seven (G7) finance ministers meeting to warn of the problems that are facing Europe due to the falling dollar.
The US currency plunged to a record low against the euro of $1.4319 on Friday, amid market turmoil and falls in share prices around the world. In New York the Dow Jones dropped 370 points, while in London the FTSE 100 closed down 1.2 per cent over the week.
The dollar's weakness, fuelled by fears about a potential recession in America, is making life extremely tough for European exporters. European ministers had hoped to register the G7's official concern about this at the meetings in Washington this weekend, but were vetoed by the US and other members of the G7.
The ministers limited their currency comments to a warning to China to allow its currency to appreciate. They ordered the Asian giant to let the renminbi rise faster, amid concerns its peg against the dollar is one of the root causes of instability in global markets. Having sent only a skeleton team to the meetings, the Chinese government is not expected to respond.
Paulson repeated the long-held US mantra that "a strong dollar is in our nation's interests and currency values should be determined in a competitive marketplace."
French finance minister Christine Lagarde said: "I hope the market will hear him. That's not the case today. I hope it changes." Ministers also promised to do all they could to protect the global economy amid market turbulence but, in the wake of Friday's sudden lurch in stock markets, warned that "uneven conditions are likely to persist for some time and will require close monitoring."
The meeting, attended by Chancellor Alistair Darling, took place on the fringes of the International Monetary Fund and World Bank meetings. Several people were injured shortly after it finished when anti-globalisation protestors marched through the capital.
The G7 communiqué said: "Our response to recent financial turbulence must be based on full analysis of its causes."
Despite the rise in oil prices to a record high above $90 a barrel this week, the statement did not urge oil cartel Opec to raise its production levels.
Iran also came up. Paulson said: "We discussed ways to deal with Iran's pursuit of a nuclear capability and ballistic missiles, its vast financial support to lethal terrorist groups, and the deceptive financial tactics employed by Iran to evade sanctions and mask illicit transactions."