G7 ministers talk up the dollar

MARY DEJEVSKY

Paris

and PAUL WALLACE

The dollar is expected to make further gains in the foreign exchange markets after determined efforts by finance ministers and central bank governors from the Group of Seven industrial countries to talk up its value. The G7 is hoping that a stronger dollar would bring relief to European economies hit hard by the strength of their currencies.

The ministers, who met in Paris over the weekend, acknowledged for the first time the seriousness of the economic slowdown in Europe. The Chancellor, Kenneth Clarke, said that growth in the UK was "well below trend".

Lawrence Summers, US Deputy Treasury Secretary, said: "We very much want to see a strong dollar. A strong dollar is very much in our interest." Hans Tietmeyer, president of the German Bundesbank, said that the correction in the parity of the dollar since last April still had further to go.

Mr Summers said that the G7 viewed the slowdown in European economic growth as a source of concern, but believed it was temporary. Mr Clarke said France and Germany had both set out specific measures they intended to take to stimulate growth in their countries.

The emphasis on growth marked a break from the usual concentration by the G7 on structural reforms, such as the reduction in budget deficits. While the Group stressed the need for continued fiscal retrenchment in the medium term, it also put new stress on the need for policies designed to sustain growth and jobs.

The French Finance Minister, Jean Arthuis, said ministers had agreed they would take action where necessary to keep the recovery going. The most important thing was to generate confidence. He added he was hopeful that there would be further cuts in interest rates.

Although Mr Tietmeyer made clear that the Bundesbank had no plans to reduce German interest rates soon, the German government is planning a package to boost jobs, including cuts in employer insurance contributions.

Theo Waigel, the German Finance Minister, said that the rigidity of European labour markets was an important cause of weak growth in Europe.

Much of the meeting was taken up with debate over how to tackle the unemployment crisis in the developed world in the run up to the Group of Seven jobs summit in Lille in April.

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