Sarkozy Says Dollar Drop Risks Triggering Trade War

Francois de Beaupuy
Bloomberg
Wednesday November 7, 2007

French President Nicolas Sarkozy told a joint session of the U.S. Congress the Bush administration must stem the dollar's plunge or risk triggering a trade war.

``The dollar cannot remain `someone else's problem,''' Sarkozy said today on Capitol Hill. ``If we are not careful, monetary disarray could morph into economic war. We would all be its victims.''

Sarkozy's complaints that the U.S. currency's drop against the euro is undermining European competitiveness struck a discordant note in a summit intended to demonstrate an improving U.S.-French relationship. His comments came as the euro surged to a record high against the dollar. The currency touched $1.4731 today, a 65 percent gain since the end of 2001.

Concern that the euro is too strong has been a Sarkozy theme since his presidential campaign earlier this year. Since his May 6 election, he has urged European Central Bank officials to lower interest rates to weaken the currency.

``If anything, this is a signal to the ECB that the euro has accelerated and they need to bear that in mind and not rush to raise rates,'' said Laurence Boone, chief French economist at Barclays Capital in Paris. ``When the dollar is depreciating, French firms are more affected than those in Germany.''

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