German Chancellor Helmut Kohl said that only U.S. government action to reduce the federal budget deficit can help the dollar strengthen.
He described as "exaggerated" some complaints by German companies about the impact of a strong deutsche mark on business."I believe - and I'm fully of the same opinion as (Bundesbank President Hans) Tietmeyer - that without the U.S. government taking certain decisions on the issue of reducing the budget deficit, there'll be no change," he said at a press conference, in answer to a question about how long the deutsche mark will remain strong against the dollar.
Kohl said the subject will be one of the main issues at the Group of Seven summit in Halifax, Canada, June 15-17.
The dollar steadied Tuesday before several economic reports this week that should indicate the outlook for the U.S. economy. It was recently at 1.3872 marks, down from 1.3888 marks late Monday, having slid almost 10 percent against the German currency since Feb. 7.
Kohl said that not all criticisms by German industry of the impact of a strong mark on their business are reasonable.
"There are justified complaints, but some of these complaints are exaggerated," Kohl said. He said industry would have even more serious problems if the mark was extremely weak.
A weak mark increases the price of imported materials and semi-finished goods for German industry and tends to push up domestic prices.
The mark hasn't only appreciated against the U.S. dollar in recent months. In the year to date, it's strengthened by 13 percent against a trade-weighted basket of 20 currencies constructed by the Bank of England.
Dist. by New York Times News Service