European Central Bank president Jean-Claude Trichet has joined EU finance ministers in urging the United States to halt the dollar's decline, warning that the slide risks derailing global growth.
Making a rare appearance at a news conference after meeting the ministers yesterday, Trichet said the US, Europe and Asia had
to do their "homework" to reverse the euro's record-setting run against the dollar.
"We have a joint statement ... that all major countries and economic areas must play their part more actively in reducing global imbalances," he said in Brussels.
With the high euro curbing exports, growth in the US$10 trillion ($14 trillion) European Union economy slipped to 0.3 per cent in the third quarter, the weakest pace in more than a year. The Central Bank last week pared its 2005 forecast to growth of 1.9 per cent from a previous estimate of 2.3 per cent.
Exports account for a fifth of the European economy, twice as much as in the US, making growth vulnerable to the euro's jump of 8.2 per cent against the US dollar since October 1.
The euro bought $1.34 yesterday, close to the record US$1.3460 set last Friday.
EU Monetary Commissioner Joaquin Almunia said the 12-nation economy appeared to be in worse shape than on October 26 when he cut his growth forecast for next year to 2 per cent from 2.3.
"Some of the downside risks that we presented then may be materialising," he said.
Business confidence stagnated for a third month in November, and manufacturing and service industries expanded at their slowest pace in more than a year. Retail sales fell for a fourth month in November as job cuts and pessimism about the economy discouraged consumer spending, the Bloomberg purchasing managers index showed yesterday.
The meeting's chairman, Dutch Finance Minister Gerrit Zalm, said the ministers hoped pro-growth policies in Europe and deficit cuts in the US would rein in the euro, and they were not pushing the Central Bank to cut interest rates or sell euros.
"The best solution would be to have policies in place in Europe; structural reforms which can enhance growth," Zalm said. "The United States should put policies in place to raise their level of savings."
The Central Bank last week left its main rate unchanged at 2 per cent.
- BLOOMBERG
