Skip to content. | Skip to navigation

Personal tools
You are here: Home Breaking news Eurozone joins onslaught against US Fed, weak dollar

Eurozone joins onslaught against US Fed, weak dollar

— filed under: , , , ,
Eurozone joins onslaught against US Fed, weak dollar

Jean-Claude Trichet - Photo European Parliament

(BRUSSELS) - Europe added its voice Monday to a growing chorus of criticism of the US Federal Reserve's decision to print billions of new dollars to shore up the nation's fragile economy.

In an unusually sharp rebuke of US monetary policy, delivered on the eve of the much-awaited G20 summit, Jean-Claude Juncker, head of the group of eurozone finance ministers, said the dollar was undervalued and the Fed stimulus threatened "risks" for the world at large.

"The dollar in relation to the euro is not at the level it should be," Juncker said at a hearing before a European parliamentary committee.

Following in the footsteps of Brazil, China, Germany and South Africa, Juncker slammed Washington for a "selfish" stance and double standards.

Currency rates "should first and foremost reflect economic fundamentals," he said, "not give rise to national stands that are more inspired by selfish reflexes than by the notion that the international community should confront global concerns."

US central bank plans announced last week to inject another 600 billion dollars (422.5 billion euros) into the economy "don't appear to respond to the expectations we could have had," Juncker said.

"I see more risks and more possibilities of skidding offcourse globally in the decisions taken by the Fed," he added.

Through a process known as quantitative easing, the Fed will buy up US Treasury securities and other assets, hoping to get more cash into the hands of companies and consumers by making long-term borrowing cheaper.

The fear in Europe is that adding so much liquidity to the US economy will dilute the value of the dollar, consequently weakening the US unit against the euro.

"You're fighting debt with debt," Juncker said.

"You stand up to severely criticise China's monetary policy, whilst in a certain way, and in fact certainly, you wage exactly the same policy in a roundabout fashion."

President Barack Obama on Monday rushed to the US central bank's defence, saying during a visit to India that what was "good for the United States, that is good for the world as a whole."

But criticism of the move from a host of countries stands to create a difficult climate for Obama at this week's G20 summit in Seoul.

Europeans sitting at the G20 table "will not fail to ask our American friends a certain number of questions on recent monteray decision that seem out of line with prepatory agreements at G7 and G20 level," Juncker said.

The European Union will be represented at the November 11-12 talks by EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso and some heads of state and government from the 27-nation bloc.

"I see a risk of inflation coming out of the crisis," Juncker added. "I don't think the problem in the United States is to add liquidities given they exist.

"I don't think US companies are going to invest more or that consumers will consume more," he added. "I see a risk of volumes of liquidities sweeping into emerging countries that won't be able to absorb them.

"So I believe the Fed decision needs further detail."

His statement came as European Central Bank chief Jean-Claude Trichet said leading central bankers were not advocating weak currency policies and backed more flexible exchange rates.

"Colleagues were very much in line with the present consensus as regards the necessity to have progressively more exchange rate flexibility," he told journalists after the regular meeting of the group of major central bankers at the Bank for International Settlements in Basel.

"All participants mentioned the fact that they were not pursuing weak currency policies," added Trichet, the spokesman for the group.

Document Actions