The United States must act, not just talk, to reduce an excessively high euro/dollar exchange rate by cutting its budget and current account deficits, Austrian Finance Minister Karl-Heinz Grasser said on Monday. Grasser, who becomes deputy spokesman for European Union finance ministers in January, pinned the blame for the euro's export-damaging rise squarely on the US deficits and said European leaders must urge Washington to act.
"The euro is too high in relation to the dollar," Grasser told reporters at a news conference in Vienna.
"Just saying that you are sticking by current language and you want a strong dollar is not enough. Europe cannot be satisfied with this," he added.
As the euro has soared against the dollar, dampening exports that are a key driver of Europe's sluggish recovery, the US administration has repeatedly said it wants a strong dollar but that exchange rates are best set by financial markets.
"There will be only be a real effect, a change in the sense of a decline in euro strength, when the Americans are prepared to do their part. This is their responsibility," Grasser said.
The dollar has been hit by incessant selling in the past two months on renewed worries about the giant US trade and budget deficits and a widespread belief that a weaker dollar is needed - and perhaps wanted by Washington - to correct them. "It is clear that Europe at the moment is paying the price for these large imbalances, the US current account deficit and budget deficit," Grasser said.
"All European policymakers must therefore appeal to the US in all bilateral and multilateral meetings that this policy (double deficits) must be changed," he added. Grasser acknowledged the strong euro was having a dampening effect on euro zone exports, which have been the most robust element of the economic recovery this year.
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