US, EU urge major economies to avoid currency battle
LISBON – US President Barack Obama and European Union leaders called on major economies once again Saturday to avoid waging a war of competing currency devaluations.
The two economic powers met at a time of global market concern over the fragile state of indebted European economies, amid fears that countries may fight to lower their currencies values to boost exports.
In a news conference after the summit, Obama took a veiled stab at economies such as Chinas, which he has blamed for suppressing the yuans value despite a bulging trade surplus.
«We reaffirmed the need for currencies that are market driven and for countries with large surpluses to boost domestic demand,» he said, after talks lasting less about 90 minutes.
Obama met with EU president Herman Van Rompuy, European Commission president Jose Manuel Barroso, US Secretary of State Hillary Clinton and the EUs foreign policy chief Catherine Ashton.
In a joint statement, they called on the industrialised and major developing economies of the G20 to «avoid competitive devaluation or exchange rate policies that do not reflect underlying economic fundamentals».
A week earlier at a G20 summit in Seoul, Obama had launched an offensive on the Chinese yuan, which critics say is kept deliberately cheap to support Chinese exporters at the expense of US jobs.
In turn, China and other export titans such as Germany had criticised the US Federal Reserve for injecting 600 billion dollars into the US economy and effectively depressing the dollar.
In Lisbon, Obama said United States had learned the lesson over the past several years that every economy was linked.
«Obviously as the worlds largest economy what happens in the United States is going to have a profound impact on Europe. The same is true, by the way, in the reverse direction.»
The United States believed that the Greek debt crisis in early 2010 had knocked the US economic growth trajectory off course, he said.
«Growth was moving at a stronger pace right before the issues of sovereign debt in Greece came up in the spring of this year,» he said.
«And when that happened, not only did that cause a significant dip in our stock market, but a lot of companies contracted in terms of their investment plans because they were uncertain.»
Obama said the most important thing he could do for Europe was to ensure growth in the US economy.
«It is a difficult task,» he added.
«Historically what happened is when have you a financial crisis, the recession that follows is more severe and long lasting than a normal business cycle crisis would be. And we are, I think, digging out of a hole of debt and deleveraging.»
Obama tried to soothe concerns in Europe that Washingtons priorities have shifted to the major powers in the Asia-Pacific region.
«Americas relationship with our European allies and partners is the cornerstone of our engagement with the world,» he said.
Both were a catalyst for global cooperation on job creation, economic recovery, and preventing nuclear proliferation, the US leader said.
«The United States has no closer partner than Europe. And we are not simply united by shared intersts, we are united by shared history, by shared democratic values, a shared set of traditions that have endured for generations.»