EVIAN, France, 3 June 2003 — G-8 leaders said yesterday they believed economic recovery would kick in as the year wore on and some called for a European interest rate cut that could bolster growth and tame the euro’s surge against the dollar.
French President Jacques Chirac, host of a three-day summit designed to boost confidence, said the Group of Eight economies that produce around 50 percent of global wealth had been doing poorly but that things looked brighter with war over in Iraq.
“Everyone is aware that growth isn’t what we would like and what we want...(but) I was struck by the real convergence of our analyses and the real conviction that all the conditions now exist for a recovery,” he told a news conference. “I am a lot more optimistic than I was. Each (of us) has problems but we saw there are solutions,” said Canadian Prime Minister Jean Chretien.
The dollar’s weakness against the yen and more recent tumble against the euro, a hyper-sensitive issue that leaders often try to skirt in public comments, gatecrashed the party at a luxury hotel in Evian on the French shores of Lake Geneva.
US President George W. Bush said that he was committed to a strong dollar but played down his influence over exchange rates and appeared to suggest that interest rates were a key factor in determining investor appetite for currencies. 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.”
A Canadian official told reporters: “As far as the value of the US dollar is concerned, Bush said he was not the one who decides. It is Mr. (Alan) Greenspan.” Greenspan heads the US Federal Reserve central bank, which sets US interest rates.
Dollar policy is the preserve of the US Treasury, not the central bank. Some analysts suggested that Bush may have been hinting that a euro zone interest rate cut could tackle European fear over the euro’s relative strength versus the dollar.
German Chancellor Gerhard Schroeder, mindful that the euro’s strength might be tamed by an interest rate cut, called for such a move, ahead of a European Central Bank meeting on Thursday. Italian Prime Minister Silvio Berlusconi also said that an ECB rate cut would be welcome.
Dollar weakness versus the euro and yen, while good for US exports and jobs as US presidential elections loom next year, has raised fears in Europe and Japan that what may help in the United States may choke recovery in Europe and Japan.
The G-8 talks involved leaders from the United States, Germany, Japan, Canada, Italy, Britain, Russia and France.
