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Last Updated: Sunday, 18 May, 2003, 14:18 GMT 15:18 UK
G8 play down dollar's decline
By Andrew Walker
BBC economics correspondent in Deauville

US Treasury Secretary John Snow and German finance minister Hans Eichel
Snow was keen to build bridges
Finance ministers from the Group of 8 major powers (G8) say that although some economic risks have receded, they still face major challenges.

But the statement issued after a meeting in Deauville in northern France did not refer to the recent decline of the US dollar, which economists say presents a serious problem for some members of the group.

Two major worries about the global economy have eased in recent weeks.

The situation in Iraq no longer casts the shadow over business decisions that it did in the run up to the war.

And there are signs of the Sars illness which originated in East Asia, abating.

But the currency markets are creating new challenges, which the ministers' statement did not go into.

Curious omission

The recent decline in the dollar has undermined the competitiveness of exporters in other important economies, notably Germany and Japan, two countries that were in difficulty already.

But many believe it rather suits the US, because a weaker dollar makes American industry more competitive.

It is a rather curious omission.

In previous decades, currency market intervention was sometimes the main action to come out of these finance ministers' meetings.

Iraq debts

This time, according to the US Treasury Secretary John Snow, currency issues were not even a major item of discussion.

Mr Snow also said there was a recognition that Iraq would not be able to make any payments on its debts before the end of next year.

Some US officials have been encouraging countries owed money by Iraq to forgive it, on the grounds that the loans were not used for the benefit of the country's population.

Three members of the G8 - Russia, France and Germany, who opposed the war - are owed substantial amounts by Iraq.

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