EVIAN, France, June 2 - U.S. President George W. Bush said he was committed to a strong dollar but played down his influence over exchange rates when Group of Eight leaders discussed the currency's recent tumble in France on Monday. White House spokesman Ari Fleischer said: "The president's position is that the United States supports a strong dollar and a strong dollar is determined by the market and that's why it is important to secure policies that advance growth in the United States."
Bush's remarks to other G8 leaders on were also relayed by Italian Prime Minister Silvio Berlusconi and several others. Bush repeated he would prefer a stronger dollar if it were up to him, they said. "His administration's intention is to have a strong dollar... He did not exclude market fluctuations," Berlusconi said after G8 leaders discussed economic prospects and exchange rates at morning talks in the French spa town of Evian. A Canadian official told reporters: "As far as the value of the U.S. dollar is concerned, Bush said he was not the one who decides. It is Mr (Alan) Greenspan." Greenspan's Federal Reserve, the U.S. central bank, decides interest rates in the world's largest economy.
Dollar weakness versus the euro and yen, while good for U.S. exports and jobs as presidential elections loom there next year, has raised fears in Europe and Japan that what may help in the United States may choke recovery in Europe and Japan. Delegates at the G8 meeting said the request for a currency debate came from the European side, despite noises from places like Germany, that the issue would not arise in Evian. One delegate said no specific G8 statement on exchange rates was to be expected on Monday, even if commentary on the matter in the end-of-meeting communique on Tuesday was not ruled out. G8 talks involved leaders from the United States, Germany, Japan, Canada, Italy, Britain, Russia and France, accounting for 50 percent of global economic output. The G8 vowed to pursue free trade talks and long-gestating efforts to boost corporate standards after accounting scandals of the kind behind the fall of U.S. energy trading giant Enron.
Jacques Chirac, host of the June 1-3 summit, had urged the G8 leaders to deliver a morale-boosting message of confidence in the world economy at a time when countries like Germany and Japan or flirting with recession and the danger of deflation. "There's acceptance within the euro zone and within Europe that provided we do face up to and overcome these challenges of structural reform, we've got every prospect of resuming strong growth in the near future," British Prime Minister Tony Blair said. Several European leaders such as German Chancellor Gerhard Schroeder and Chirac himself are confronted at the moment with resistance to welfare and pension reforms, with train drivers going on strike in France on Monday evening, for example.
PRESSURE ON EUROPE, ECB
Berlusconi, whose country takes over the European Union presidency in July, appeared impressed by Bush's plans for tax cuts to boost U.S. growth and unhappy at Europe's inability to do likewise due to deficit control rules in the EU's Stability and Growth Pact. "At moments like this, an increase in the deficit could be considered virtuous," he told reporters. He had also said on the eve of Monday's talks that an interest rate cut by the European Central Bank, which meets on Thursday, would be welcome. "A decision to cut rates might be in the air," he said. "And I think it's necessary." Many are arguing for a euro zone rate cut for two reasons -- the traditional one that it helps growth by reducing business borrowing costs; the second being that it could tame the euro's rise against the dollar.
Just what the U.S. strong policy is has never been officially spelled out since it was established in the mid-1990s, but financial markets feed on every word or expression, no matter how cryptic, for signals on when to buy and sell various currencies. The dollar, down more than 10 percent against the euro this year, hit an all-time low against the European currency in the weeks after comments by U.S. Treasury Secretary John Snow, who said when G8 finance ministers met in France in mid-May that recent currency movements had been relatively modest. In day-to-day trading, the dollar gained some ground against the euro on Monday morning, up about 0.8 percent, with traders saying the move was driven by better sentiment on U.S. share prices and the fact G8 leaders were addressing the matter of currencies.//