WASHINGTON, 16 December 2004 — President George W. Bush pledged yesterday to try to create conditions for a rebound of the weak dollar and said the latest Federal Reserve rate hike was an indication of concern about the greenback.

Bush tried to soothe concerns of Italian Prime Minister Silvio Berlusconi, who came to Washington intent on telling Bush of his worries that the euro was suffering due to the weak dollar.

It was rare for Bush to speak at length about the dollar and equally unusual for him to cite a Fed action. He said the rate increase on Tuesday, the Fed’s fifth since June, was “a signal to world markets that the chairman (Fed Chairman Alan Greenspan) is also aware of the relative currency valuations between the euro and the dollar.”

Bush said he believed working with the US Congress to confront the US budget deficit and reform Social Security would send a signal to the markets that the United States really supports a strong dollar.

“We believe that the markets should make the decision about the relationship between the dollar and the euro. Therefore to the extent that the federal government is involved with making the conditions such that a strong dollar will emerge, we’ll do everything we can in the upcoming legislative session to send a signal to the markets that we’ll deal with our deficits, which hopefully will cause people to want to buy dollars,” Bush said. Whether that strategy will work is unclear. Bush’s plan to create private accounts for younger workers for Social Security is estimated to cost $1 trillion to $2 trillion over a decade, and the administration has indicated it will borrow the money. Billions more in Iraq funding, expected to be requested in January, may also further bloat the deficit.

Meanwhile, Vice President Dick Cheney said yesterday that it is critical to make President Bush’s tax cuts permanent during his second term, while achieving broader reforms in the tax code and bolstering Social Security. Speaking at the start of a two-day White House conference on the economy, Cheney said the administration would put a top priority on making the tax cuts, which are all due to expire after 2010, permanent as a way of bolstering future economic growth.

Cheney said the administration had accomplished a great deal in its first term but a number of unfinished items remain for Congress to address.