Eichel Wants Strong Euro on G20 Agenda

Speaking one day before Germany was to host the G20 meeting, Hans Eichel on Thursday called on the United States, Europe and Japan to take a common position on recent developments on the world's foreign exchange markets.

Many European Union officials are becoming worried the euro, which hit a new all-time high of $1.3073 on Thursday, could begin to hurt the bloc's growth prospects as European goods become more expensive on world markets.

"It's a brutal development, as (European Central Bank chief) Jean-Claude Trichet has said," Eichel said in an interview with German ARD television. "It will have to be talked about. But, as befits currency issues, such discussions should take place behind closed doors and hopefully Japan, the US and Europe will be able to find a common position."

Eichel's comments, coming just a day before finance ministers and central bank chiefs from the world's 20 most powerful nations gather in Berlin, are the clearest sign yet of Germany's concern.

The Group of 20 (G20) comprises the world's seven richest nations -- Britain, Canada, France, Germany, Italy Japan and the US -- as well as 13 others, China, India, Russia, Argentina, Australia, Brazil, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, Turkey and the EU.

The G20 group accounts for 90 percent of the world's total economy and around 80 percent of its trade. It also comprises roughly two-thirds of the planet's population. The summit will cover wide-ranging topics from international tax evasion, money laundering and high oil prices.

The meeting is scheduled to begin with a dinner on Friday evening, followed by two days of talks on Saturday and Sunday. Officially, the fall of the dollar and of Asian currencies pegged to it -- such as the Chinese yuan -- is not on the agenda of the G20 talks. But the issue is nevertheless likely to dominate discussions over the weekend.

EU and Japan worried

Europe and Japan appear to be on the same wavelength. The head of the Bank of Japan, Toshihiko Fukui, estimated Thursday that "developments on the foreign exchange and financial markets could create uncertainty for the Japanese economy. We will monitor closely these developments and their consequences."

The day before, Japanese Finance Minister Sadakazu Tanigaki had said that very big movements in the dollar-yen exchange rate could trigger a reaction from the government. But US Treasury Secretary John Snow, currently touring Europe, has indicated that the US is not prepared to participate in concerted intervention and told European governments to undertake structural reforms to help boost growth.

That line doesn't go down well in some capitals in Europe, where some see the United States reaping the economic benefits of a weak dollar at the expense of those countries suffering under the strong euro. Some EU officials have been critical of the United States for its massive budget and balance of payments deficits, but Snow argues that most of Europe is suffering from a "growth deficit," and that the US deficits will come down when the rest of the world picks up the pace of economic growth.

Germany, with its export-driven economy, is particularly sensitive to the damage that could be wrought should the dollar continue to slide. However, Eichel is unlikely to be able to convince Snow of the need to have concerted central bank action in the foreign exchange markets.

"Everybody knows what our position is -- a strong dollar, (and) currency values set in open markets," Snow said during a visit to Poland before heading to Berlin.