PARIS (MNI) – The challenge for France as future president of the
G20 will be to correct the large external balances at the global level,
European Central Bank President Jean-Claude Trichet said in a newspaper
interview published over the weekend.

“Such a correction is crucial if we are to avoid another major
crisis in the future,” Trichet told the French daily Le Progres. “And in
Seoul the G20 explicitly asked the French presidency to work on criteria
for measuring these external deficits and surpluses.”

Trichet again side-stepped a question on the risks of the Federal
Reserve’s new round of quantitative easing, merely reiterating his
agreement with comments by senior U.S. officials in favor of a strong
dollar. “A dollar that is strong and credible among the major currencies
of the industrialized countries is in the interests of the United
States, it is in the interests of Europe and it is in the interests of
the entire international community,” he said.

Concerning emerging market economies with large current account
surpluses and managed currency regimes, Trichet called for “a move
towards more flexible exchange rates, involving a gradual and orderly
appreciation of their currencies vis–vis the major convertible
currencies.”

Asked whether there was a currency war, Trichet replied that it was
“a totally inappropriate expression to use.”

Over the longer term, the big challenge is “to speed up the move to
a system of global governance that fits the new world that we have
created over time, in particular over the past 20 years following the
collapse of the Soviet empire and the conversion of large emerging
countries to the market economy,” he said.

Asked about the progress of fiscal consolidation in Ireland and
Greece, Trichet said, “It is very important for all countries, and not
just Ireland and Greece, to take measures to ensure medium-term fiscal
stability. This is necessary in advanced economies, in the European
Union in general and, of course, in the euro area in particular.”

This is also true for France, he said. Fiscal consolidation “will
help to engender confidence and thus to consolidate the recovery and, in
turn, create jobs. Like all euro area countries, France is encouraged to
continue to actively implement reforms.”

“The euro area as a whole can and must increase its potential for
growth and job creation,” Trichet reiterated. “The extensive reforms
that have been undertaken in all countries, such as the pension reform
in France, are needed. They are a step in the direction of fiscal
responsibility and the smoother functioning of the European economy, and
of the French economy, and will lead to more growth and jobs.”

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