EU calls for currency appreciation in Asia

EU calls for currency appreciation in Asia

Agence France-Presse, Luxembourg

EU finance ministers, eager to ease the pain of the euro's
strength, stepped up pressure on Tuesday on Asian countries to
let their currencies appreciate ahead of an upcoming G7 meeting.

Luxembourg Prime Minister Jean-Claude Juncker, whose country
currently holds the EU's presidency, said EU finance ministers
believed an "orderly" appreciation of Asian currencies was
"absolutely necessary".

Juncker said he would voice European concerns about exchange
rates at a meeting in Washington on Friday and Saturday of
finance ministers of the Group of Seven (G7) most industrialized
countries.

Speaking at a press conference after meeting on Monday with
eurozone finance ministers, he said they had agreed that he would
"repeat verbatim" at the Washington gathering a message he gave
in February in London at the last G7 summit.

"In other words, excessive volatility and concern about
exchange rates because the current position remains contrary to
the objective of robust economic growth," he said.

"We also repeated that exchange rates will not cause
undesirable economic imbalances. All important economies would be
expected to redress global economic imbalances ... so that if
appreciation has to take place, it will be orderly," he said.

Juncker added: "Appreciation of some Asian currencies is more
than highly desirable."

Past calls for currency appreciation in Asia have fallen on
deaf ears, leaving policymakers in the eurozone with the
impression that their countries are bearing the brunt of the
dollar's weakness because many Asian currencies are either
directly or indirectly pegged to the U.S. currency.

That makes goods produced in the eurozone more expensive on
global markets compared with products from the United States and
Asian countries.

The strength of the euro and soaring oil prices, two factors
largely out of the control of finance ministers, have been
raising concerns in European capitals.

Juncker warned that the soaring oil prices were "beginning to
weigh on the possibility of having firmer growth in Europe and
the world".

He added: "We underestimated the development of oil prices,
which have risen 40 percent since the beginning of the year."

Concerned about high oil prices and the strength of the euro,
the European Commission last week cut its 2005 growth estimate
for the eurozone to 1.6 percent from 2.0 percent previously.

EU ministers may find some relief in a report by the
International Energy Agency which said on Tuesday that factors
behind recent record high oil prices may be easing, reporting
increases in supply and signs that growth of demand may be
slowing in China.

In the face of soaring oil prices and a strong euro, European
policymakers have few options to spur their economies since most
countries have no room to increase spending under EU rules and
the European Central Bank has said it has no plans to cut
interest rates.

The European Commission, which has the job of policing EU
deficits, said it was keeping a close eye on the public finances
of France and Germany for signs that their deficits are improving
as Paris and Berlin promised they would.

Meanwile, Italian Finance Minister ruled out painful measures
to rein in his country's deficit despite signs that it is
spiraling well beyond EU limits.