G7 summit's fudged message

Analysis By Stephen Evans BBC North America Business Correspondent

The falling value of the dollar on international currency markets was the focus of a key meeting of G7 finance ministers in Florida over the weekend. But crafting their message was bound to cause difficulties.

It must be a writer's nightmare.

There you are toiling in a conference centre in the heat of a Florida resort on what ought to be a lazy Saturday afternoon.

Outside the window are men and women basking themselves in the sun.

You, though, are inside and surrounded by a gaggle of very serious men in very dark suits, scrutinising every word you write.

It is your task to craft their message.

If you make it too clear, the financial markets will go into a spin. If you keep the meaning too opaque, well, what's the point?

Ambiguous communique

That is what drafting the final communique of a G7 summit must be like. Journalists and foreign currency traders will pore over every syllable, seeking a hint of policy change.

The dollar has fallen dramatically against the euro in the past year Dollar falls after G7 meeting

If you say too much, there will be turmoil; if you say too little, there will be no meaning rendered.

In the end, the message from the weekend summit in Boca Raton in Florida was conveyed by a single line in the third paragraph of their statement:

"Excess volatility and disorderly movements in exchange rates are undesirable for economic growth" - the words are code for 'the dollar's fallen far enough.'

The difficulty is that different delegations may put different emphases on the same words.

This particular phraseology allowed the Europeans to come away, saying they had won a recognition from the Americans that the dollar/euro exchange rate is out of kilter.

But they also allowed the Americans to leave the conference in the knowledge that no revaluation was on the way.

Words not deeds

The other message on exchange rates was further down in the same third paragraph of the communiqué:

"We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms" - code for telling the Chinese and Japanese that they should allow their currencies to move more freely instead of intervening in the markets to restrain their rise against the dollar.

The difficulty for the finance ministers is that, whatever the words of the statement, there was no sign that any policy would actually change.

It's true that it would be hard for the Chinese to indicate change since they (oddly) aren't members of G7.

But neither the Europeans nor the Americans are likely to start intervening more actively on the foreign exchanges to reverse the dollar's fall, while the Japanese made a point of saying that the yen/dollar ratio was not out of alignment.

In other words, the statement expressed an aspiration and not an intention, and an aspiration is unlikely to change exchange rates for very long.

Networking

So what's the point of the grand gathering, you might ask?

A true sceptic might say that words are cheap: "Fine words butter no parsnips," as the old English proverb puts it.

A more charitable view is that networking by finance ministers and bank governors produces a climate which is useful when global action really is needed.

In the currency crises of the late 1990s, when exchange rates were extremely volatile and there was a risk of financial turmoil cascading round the globe, it was useful to have finance ministers who had the measure of each other and who could talk on easy terms when events were moving quickly and swift action was needed.

So Boca Raton was not a waste of time. Policy doesn't suddenly change by diktat after a debate in a Florida hotel.

But it is still helpful if a group of men with a great deal of power understand each other and know how to do business together when the need arises.

The G7 group of finance ministers includes those from the leading industrial countries: the United States, Japan, Germany, Britain, France, Italy and Canada.