Eurozone ministers call for stronger Chinese currency
Eurozone ministers are pressing China for a more freely floating yuan, after being unable to find a common position on the euro's unprecedented strength against the US dollar.
The finance ministers of the 13-country eurozone, meeting in Luxemburg on Monday (8 October), argued that the Chinese policy of holding the yuan broadly stable against a basket of currencies does not reflect the fundamental strength of the Chinese economy.
Consequently, they called on China to let its currency float more freely.
"It is desirable that effective exchange rates move so that necessary adjustments will occur," said eurogroup chairman and Luxembourg prime minister Jean-Claude Juncker in a statement, Forbes reports.
The call comes after Europe's trade deficit with China increased from €41.3 billion to €50.4 billion in the first half of this year, compared with the same period last year – a jump of 22%.
Ministers agreed to send a delegation consisting of Mr Juncker, European Central Bank president Jean-Claude Trichet and EU monetary affairs commissioner Joaquin Almunia to China by the end of this year.
Meanwhile, the dollar's unprecedented weakness vis-a-vis the euro has hit EU exporters and led to a steep decline in the euro zone's trade surplus with the US.
Nevertheless, ministers failed to find a common position on how to respond to the euro's rise against the dollar.
While French president Sarkozy considers a strong euro a economic threat, German finance minister Steinbrueck went as far as to say: "I prefer a strong euro," according to Bloomberg.
The joint statement was limited to repeating the G7 position that "excessive volatility" of exchange rates is "undesirable for economic growth", and noted with "great attention" that the US have reaffirmed that a strong dollar is in the interest of their economy.
On 19 October, European officials will meet US counterparts at a G7 meeting in which the euro-dollar relationship is likely to be discussed.
[Source: By Jochen Luypaert, Euobserver, Brussels, 09oct07]
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