The current account deficit remains sustainable in short term, but while marketfinancing of the deficit "buys us time," the deficit is not sustainable for the long term, a former Federal Reserve economist said Thursday. Catherine Mann, who served withthe Fed and briefly in the Clinton White House, said that in light of exceptionalproductivity growth and a strong dollar, the U.S. could continue to run external deficitsat or above 4% of GDP "for two or three more years." In an update to her September2000 analysis of the sustainability of the historically high current account deficit,Mann, now an analyst with the Washington-based Institute for International Economics,projected the dollar would weaken against the euro this year. Mann said increasedEuropean market integration will raise demand for euro securities, thus allowing forrelative dollar depreciation and the resulting improvement of the U.S. deficit. Shereferred to this dollar to euro transition as a "good baton hand-off" in the "relay race" ofthe new global economy. The smoother the transfer, the better the chances of a win forthe team, she said. "If we all got into the new economy world, we would have astabilizing of the current account as a share of GDP," Mann said. She said the globalcatch up to the rapid U.S. growth levels in recent years contributed to the high demandfor dollar investments and an inflated deficit. Her analysis repepeated prescriptions forstructural adjustments aimed at increasing private savings, providing improvededucation and training for American workers, and lowering trade barriers in the servicesector worldwide.