EVIAN, France, June 1 - The dollar's recent tumble on the currency markets forced its way onto the agenda at a G8 summit in France when leaders said that the sensitive issue of exchange rates would be broached on Monday. With stagnation or worse threatening some of the Group of Eight economies such as Germany, Japan and Italy, Italian Prime Minister Silvio Berlusconi acknowledged that currencies would be discussed during Monday morning talks on economic prospects.
"We will be busy with that tomorrow," Berlusconi said when asked by reporters about the dollar, which has fallen to record lows versus the euro in recent days, raising fears that exports from the 12-nation euro zone will lose in price competitivity. Berlusconi, whose country takes over the European Union's rotating presidency in July, also made it clear he would welcome a reduction in euro zone interest rates by the European Central Bank, a move that could tame the euro's surge versus the dollar as well as making business borrowing costs cheaper in the zone.
"A decision to cut rates might be in the air," he said. "And I think it's necessary." While a weaker dollar could help U.S. exporters sell goods abroad and enhance prospects for a U.S. economic recovery, many experts fear this could be at the expense of countries like Japan and Germany, a big exporter to the United States. European Commission President Romano Prodi, who was invited to the talks between the leaders of the United States, Germany, Japan, Canada, Italy, Britain, Russia and France, said exchange rates would be one of several economic issues broached. Asked if the G8 leaders had discussed currencies on Sunday, the first day of a three-day meeting in the French spa town of Evian, Prodi told journalists: "not in a specific way". "But tomorrow we will talk about the global economy in which there will be (discussion) about recovery, unemployment, currencies, all aspects of the concerns we have today."
Officials from many countries said prior to the meeting in Evian that worries about the dollar level or at least the speed of its slide against the euro, would not be an issue at the G8 meeting, where central bankers and finance ministers are absent. President George W. Bush said in media interviews ahead of the summit, however, that Washington continued to back a strong dollar even if financial markets seemed to be putting a value on the currency which went against the grain of that policy. One delegate at the Evian meeting said the push for the G8 to broach currencies came from the European side, although the problems posed by currency strength versus the dollar is one Japan has struggled with for far longer than the euro zone. "This is a request from the Europeans and not from the other side of the Atlantic," the delegate said. Asked about the state of play as of Sunday on any written declarations, the delegate said: "There is no communique on growth or exchange rates."
French President Jacques Chirac, summit host, said his goal will be for the G8 to issue a strong message of confidence in global economic prospects. On currencies specifically, all his spokesman would say was "we'll see". A senior Japanese official travelling with Prime Minister Junichiro Koizumi said Koizumi was likely to stress Tokyo's worries of an overly robust yen when Japan's economy is weak. The Japan authorities have spent billions from foreign currency reserves to try to tame the yen against the dollar to preserve prospects of an export-led recovery after spending much of the past decade in the doldrums.//