— Says Germany on the Verge of Self-Sustaining Recovery

WASHINGTON (MNI) – The G7 countries have agreed that excessive
volatility on foreign exchange markets has “negative implications” for
economic growth and financial stability, European Central Bank Governing
Council member Axel Weber said Saturday.

The G7 has also reminded developing countries with external
surpluses of their commitments made in Toronto to reform their currency
regimes, the central banker told journalists on the margins of the IMF
and World Bank meetings.

“We spoke [Friday] about the exchange rate topic at the G7
meeting,” Weber said. “We also established shared points of reference.”

“For one thing, we established that we have a shared interest in a
resilient and stable international financial system … and that
exchange rates should reflect economic fundamentals.”

“We also again agreed to the typical G7 language as a shared term
of reference that namely excessive volatility and disorderly
developments of exchange rates have negative implications for economic
growth and financial stability,” he underscored.

Thirdly, they reminded countries in emerging economies with current
account surpluses — he did not mention China by name — of promises
made at the G20 meeting in Toronto in late June to reform their exchange
rate regimes.

Concerning the German economy, the Bundesbank president said
growth would “normalize” in the second half of the year at a slower pace
than in the first. Still, “fundamentally the economic recovery is in
tact.”

The country is “on the verge of a self-sustaining recovery,” he
emphasized, noting that multiple factors, not only exports, were behind
the 2.2% GDP surge in 2Q.

Speaking on the same panel, German Deputy Finance Minister Joerg
Asmussen reiterated that domestic growth had “increased in breadth.”
This year’s fiscal policy “is still expansive,” he said, implying that
this is not so well understood in America.

“We will gradually consolidate the deficit as of 2011,” he
reminded.

–MNI Washington: +1-202-213-7496; tbuell@marketnews.com

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