Europe takes currency fight to US
BRUSSELS (AFP) – – European officials said Thursday a rapidly rising euro, victimised by an undervalued US dollar and Chinese yuan, could threaten eurozone recovery and vowed to press both Washington and Beijing to take action.
European Union leaders contend that the euro — currently at an eight-month high of more than 1.40 dollars — is being squeezed in a transglobal race for trading income.
“The euro is currently bearing a disproportionate burden in the adjustment of the global exchange rate,” a spokesman for European Union Economic Affairs Commissioner Olli Rehn said.
“This may affect recovery of the European economy,” the spokesman stressed, reiterating that the yuan is “still significantly undervalued.”
European Union leaders said Wednesday they had urged Chinese Premier Wen Jiabao to act to raise the value of the yuan during a fractious summit in Brussels.
Rehn’s spokesman contended Thursday that US currency policies were also troubling the European Union and said the EU would raise the same complaints it did with China on Wednesday “to the Americans, to (US Treasury Secretary Timothy) Geithner too.”
Some economists suspect that it suits the United States to have a weak dollar and a strong euro when the pace of recovery is so dependent on winning the competition for exports with emerging powers such as China, India, Russia or Brazil.
Finance chiefs from the G7 grouping of Britain, Canada, France, Germany, Italy, Japan and the United States will later this week kick off annual talks in Washington, ultimately gathering 187 states under the auspices of the International Monetary Fund and the World Bank where fears of a “currency war” could dominate discussion.
Rehn’s spokesman said EU leaders Herman Van Rompuy and Jose Manuel Barroso had told Wen “very frankly, clearly, without pressure” that Beijing had to live up to its pledge to allow its currency to appreciate.
Wen in effect told the pair to ease up during a fractious summit that broke up Wednesday amid arguments over currency, trade barriers, IMF voting power and human rights abuses.
The Chinese leader said bluntly that a sharp yuan appreciation would “cause many Chinese companies to go bankrupt, casting people out of work… and creating social unrest.”
EU Trade Commissioner Karel De Gucht also weighed in Thursday, arguing that China’s export strength was underpinned “much more than the currency” by massive subsidies and other “unfair trade practices.”
The EU is already investigating such subsidies in the market for modems, where Chinese models are flooding Europe.