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Jul 19 11:42
Jul 19 16:42
Jul 20 00:42
By Sandrine Rastello and Gabi Thesing
July 18 (Bloomberg) -- Jean-Claude Trichet's rift with
President Nicolas Sarkozy deepened after the European Central
Bank chief rejected a French government call for greater
political influence in setting interest rates.
Any attempt to influence the ECB violates the European
Union's founding treaty, and ``such declarations are not
acceptable,'' ECB spokeswoman Regina Schueller said on behalf of
Trichet.
Sarkozy, who says gains in the euro penalize European
exporters, has clashed with Trichet in an effort to curb ECB
interest rates and weaken the currency. While Sarkozy has
retreated from a challenge to ECB independence, he said last
week that he and Trichet are not ``on the same wavelength.''
``It's understandable that Trichet is starting to get
annoyed about the constant barking'' from France, said Sebastian
Wanke, an economist at Dekabank in Frankfurt. ``Sarkozy is
trying to score points by playing the tough guy since it's
relatively popular in France to bang the drums against the
ECB.''
Sarkozy has criticized the bank's exclusive focus on
inflation, and Trichet has questioned Sarkozy's tax cuts that
would violate a French pledge earlier this year to reduce the
nation's budget deficit.
Influencing ECB
Trichet's statement was triggered by comments made by
French European Affairs Minister Jean-Pierre Jouyet in today's
International Herald Tribune. ``You can influence the ECB's
decisions by having a more open discussion about the motivations
behind interest-rate decisions,'' Jouyet said.
The ECB has doubled the benchmark interest rate to 4
percent, from 2 percent in late 2005, to contain inflation as
the economy of the 13 euro nations recorded its fastest pace of
growth since 2000 last year. The U.S. Federal Reserve has
maintained its 5.25 percent rate since June 2006.
The euro rose 0.2 percent to $1.3810 at 6:11 p.m. in Paris,
retreating from a record of $1.3833 earlier today. It's up 4.4
percent this year and 55 percent since the end of 2001.
After meeting with German Chancellor Angela Merkel in
Toulouse, France, two days ago, Sarkozy called for an end to
``monetary dumping,'' saying other nations keep their currencies
artificially weak to boost exports.
Sarkozy told his Cabinet today that Merkel's views on the
common currency are moving closer to his, said government
spokesman Laurent Wauquiez. Merkel and Sarkozy agreed in
Toulouse on the independence of the ECB and said the Group of
Eight leading industrial nations should address currency issues.
Debating Monetary Policy
``For him, it's not about questioning the independence of
the central bank but showing that monetary policy is a topic of
debate and dialogue,'' Wauquiez said, citing Sarkozy. ``In that
respect, Madame Merkel's position has evolved in a positive
way.''
A German government official, who declined to be
identified, said today Merkel told Sarkozy in Toulouse she'd
reject any move to limit ECB independence or curb its monetary
policy making. The U.S. current-account and budget deficits, not
ECB interest-rate increases, are the main cause of the dollar's
drop and must be addressed with fellow G-8 members, the official
said.
Germany's history of hyperinflation after World War I makes
its policy makers particularly apprehensive about rising prices.
In France, by contrast, Sarkozy won election May 6 after a
campaign featuring attacks against the ECB's focus on inflation
instead of economic growth.
Trade Deficit
French economic expansion is set to lag behind the euro
region for a second year in 2007. France's trade deficit reached
a record in 2006 as Germany's exports rose 13.7 percent to their
highest ever.
Trichet, a former governor of the Bank of France, told
reporters last September that there were already ``a great
number of occasions for meetings together'' with politicians,
and that the EU treaty was ``very precise'' in outlining how
contact should occur.
While Trichet routinely attends meetings of European
finance ministers and invites their representative to attend
meetings of the ECB governing council, he has resisted demands
from Luxembourg's Jean-Claude Juncker, who heads the group of
euro-region finance ministers, for more talks.
To contact the reporter on this story:
Gabi Thesing in Frankfurt at
gthesing@bloomberg.net (Related) ;
Sandrine Rastello in Paris at
srastello@bloomberg.net (Related)
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