- The Washington Times - Sunday, February 8, 2004

BOCA RATON, Fla. (AP) — The United States and its allies resolved sharp differences over how to manage the falling dollar, agreeing with the U.S. call for “flexibility” while throwing in an expression of concern about “excess” volatility.

The agreement was included in the final communique issued by the Group of Seven leading industrial countries at the end of two days of contentious talks over the best approach to take to deal with a dollar that has slumped to record lows in recent weeks against the euro, the common currency of 12 European countries.

The G-7 countries — the United States, Japan, Germany, France, Britain, Canada and Italy — proclaimed that the global economic recovery has “strengthened significantly” in recent months.

The finance officials endorsed continued cooperative efforts to promote sustained global growth and pledged support in efforts to cut the foreign debt burdens of war-torn Iraq and Afghanistan.

The communique also urged Argentina, currently involved in contentious negotiations with its creditors and the International Monetary Fund, to push ahead with the economic reform program endorsed by the IMF and “engage constructively” with the creditors who hold more than $80 billion in loans the country defaulted on in 2001.

On the dollar, the United States won in its effort to retain an endorsement of flexibility in exchange rates that the Group of Seven nations had made at its September meeting.

Currency traders have interpreted the word “flexibility” as indicating a green light for allowing a continued fall in the dollar’s value. The Bush administration supports this fall as offering a way to increase U.S. exports and help deal with the loss of 2.8 million U.S. manufacturing jobs over the past 3 years.

However, in a bow to European complaints that the dollar’s steep slide is hurting their exports, the G-7 added language to the communique declaring, “Excess volatility and disorderly movements in exchange rates are undesirable for economic growth.”

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