Financial Regulatory Forum

France worried about euro, wants G20 discussion

By Reuters Staff
September 23, 2009

By Anna Willard
PARIS, Sept 23 (Reuters) – France is concerned about the level of the euro against other currencies and hopes the Pittsburgh G20 will set a timeframe for a future discussion on exchange rates, a French government official said on Wednesday.

The euro hit a one-year high of $1.4840 earlier on Wednesday. Since G20 finance chiefs signalled again earlier this month that stimulus for their economies would remain in place for as long as necessary, the dollar has fallen five cents.

“It worries us,” the official, who spoke on condition of anonymity, told Reuters when asked about the euro’s current level.

He said he did not expect a precise discussion on currencies to take place at a meeting of G20 leaders in Pittsburgh on Thursday and Friday, but rather talks on the process.

“We hope that there is a framework that will allow us to fix a time for a discussion on currencies at a later stage,” the source said.

The United States wants to reach agreement in Pittsburgh on a framework to solve the world’s global economic imbalances, pointing to issues including the huge trade surpluses and currency reserves held by countries such as China as well as the world’s dependence on U.S. consumers borrowing and spending.

Such issues, however, also imply a discussion on imbalances between exchange rates, including a renewed push for China to free up its currency regime.

A separate G20 source involved in preparing the meeting said the euro’s level, notably its rise against the U.S. dollar this week, was being monitored.

“The French have indicated President (Nicolas) Sarkozy may discuss it in the margins or bilaterally. But it won’t be discussed as part of the G20 agenda since central bankers won’t be present,” the source said.

“At the moment it is not the remit of the G20 to discuss monetary policies per se. But leaders are free to discuss what they like.”

The G20 source said Germany and European Central Bank President Jean-Claude Trichet were less worried about the euro.

At the end of August, President Nicolas Sarkozy said France would not accept “that the euro bears on its own the weight of adjustments (in currency markets), as it has done in the past.”

He said it was necessary to work out “how to avoid developments in the levels of key currencies that could lead to very serious tension.”

The strong euro makes it harder for French companies trying to sell goods outside the euro area, although Germany is France’s biggest export market.

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