European finance ministers called on authorities in Beijing to allow the yuan to appreciate against the euro and officials will travel to China later this year to discuss the matter with their counterparts.
``In emerging economies with large and growing current- account surpluses, especially China, it is desirable that effective exchange rates move so that necessary adjustments will occur,'' Luxembourg Prime and Finance Minister Jean-Claude Juncker told a press conference in Luxembourg today, reading from a statement.
Juncker, who chaired the meeting, will travel to China with European Central Bank President Jean-Claude Trichet and European Union Monetary Affairs Commissioner Joaquin Almunia.
Juncker went on to say that finance ministers and policy makers ``noted with great attention that U.S. authorities have reaffirmed that the strong dollar is in the interests of the U.S. economy.'' Investors in the yen should also take into account that Japan's economy is ``on a sustainable recovery path,'' he said.
Juncker drew reporters' attention to the order in which he listed the euro region's foreign-exchange priorities.
``We note that the euro area is playing its role for an orderly reduction of the imbalances by implementing structural reforms and contributing to a rebalancing of growth,'' he said.
Monday, October 8, 2007
Gold rises as dollar loses steam after jobs report
The dollar quickly ran into resistance and began to lose some steam, with the dollar index, which measures the greenback against a basket of major currencies, recently down 0.2%.
Gold for December delivery gained $3.40, or 0.5%, to close at $747.20 on the New York Mercantile Exchange. Earlier in the session, gold hit an intraday low of $750.70 and a low of $732.70.
Gold, which is denominated in dollars, becomes more expensive to buy in other currencies when the dollar rises. By contrast, gold becomes cheaper when the dollar falls.
The dollar first rallied against major counterparts early on Friday, after the September employment report showed an in-line gain of 110,000 payrolls and large upward revisions of previous months. See the jobs report.
Speaking after the jobs report, Fed vice chairman Donald Kohn said the half-a-percentage point rate cut last month may be enough to keep the economy from sinking after the recent financial market turmoil.
The dollar has been in a free-fall since the Federal Reserve cut interest rates by a hefty 50 basis points on Sept. 18. The Fed cut rates after the August employment showed jobs unexpectedly fell, sparking concern that this summer's mortgage-related credit crisis was impacting the economy.
Yet, early signs of stability in credit markets, and now the September jobs report, has helped to support the dollar.
"There has been a massive degree of support for the dollar as it has rallied back to what was support but is now resistance, but we suspect that this is just a rally," said Julian Philips, analyst at GoldForecaster.com, in a note.
"The uncertainty appears likely to persist in many quarters of the financial world with confidence being the victim," he said. "There is little sign of the actions needed to structurally improve prospects for the dollar, so we see no reason why gold and silver should not continue to rise."
For Jon Nadler, metals analyst at Kitco, the dollar's muted reaction after the jobs report indicates that currency markets don't really buy Kohn's remarks at face value. Part of the dollar's strength over the past week came after European Central Bank president Jean-Claude Trichet raised alarm about the sliding dollar and called on the U.S. to do more to support it.
Finance ministers from the Group of Seven countries are slated to discuss the dollar when they meet in a few weeks. "It is not very difficult to detect a concerted effort going on here to stem the bloodletting in the dollar."
From here, gold should move back up to test resistance at $757, according to Zachary Oxman, a senior trader at Wisdom Financial.
And longer term, into the end of 2007 and beginning of 2008, "watch for gold to move up and through $800," he said in emailed comments.
Gold for December delivery gained $3.40, or 0.5%, to close at $747.20 on the New York Mercantile Exchange. Earlier in the session, gold hit an intraday low of $750.70 and a low of $732.70.
Gold, which is denominated in dollars, becomes more expensive to buy in other currencies when the dollar rises. By contrast, gold becomes cheaper when the dollar falls.
The dollar first rallied against major counterparts early on Friday, after the September employment report showed an in-line gain of 110,000 payrolls and large upward revisions of previous months. See the jobs report.
Speaking after the jobs report, Fed vice chairman Donald Kohn said the half-a-percentage point rate cut last month may be enough to keep the economy from sinking after the recent financial market turmoil.
The dollar has been in a free-fall since the Federal Reserve cut interest rates by a hefty 50 basis points on Sept. 18. The Fed cut rates after the August employment showed jobs unexpectedly fell, sparking concern that this summer's mortgage-related credit crisis was impacting the economy.
Yet, early signs of stability in credit markets, and now the September jobs report, has helped to support the dollar.
"There has been a massive degree of support for the dollar as it has rallied back to what was support but is now resistance, but we suspect that this is just a rally," said Julian Philips, analyst at GoldForecaster.com, in a note.
"The uncertainty appears likely to persist in many quarters of the financial world with confidence being the victim," he said. "There is little sign of the actions needed to structurally improve prospects for the dollar, so we see no reason why gold and silver should not continue to rise."
For Jon Nadler, metals analyst at Kitco, the dollar's muted reaction after the jobs report indicates that currency markets don't really buy Kohn's remarks at face value. Part of the dollar's strength over the past week came after European Central Bank president Jean-Claude Trichet raised alarm about the sliding dollar and called on the U.S. to do more to support it.
Finance ministers from the Group of Seven countries are slated to discuss the dollar when they meet in a few weeks. "It is not very difficult to detect a concerted effort going on here to stem the bloodletting in the dollar."
From here, gold should move back up to test resistance at $757, according to Zachary Oxman, a senior trader at Wisdom Financial.
And longer term, into the end of 2007 and beginning of 2008, "watch for gold to move up and through $800," he said in emailed comments.
Gold falls as dollar advances
Gold for December delivery fell $8.50, or 1.1%, to $738.70 an ounce on the New York Mercantile Exchange.
A stronger U.S. currency makes dollar-denominated commodities, such as gold, more expensive. The dollar found support Friday after an upbeat September jobs report eased concerns about a U.S. recesssion.
"A few market ships hit some rough waters this Columbus Day, and gold's was one of them," said Jon Nadler, analyst a Kitco, in a note. "What started as a mild decline in values overnight in Asia, soon turned to more serious selling as local stocks took to flight after the U.S. employment data hit with full bullish impact."
And with no data on Monday, the dollar index, which measures the greenback against a basket of key currencies, rose 0.6%.
The strength of the U.S. currency Monday came amid a meeting of European finance ministers, who are trying to apply downward pressure on the euro. The euro has risen to record highs due to a sliding dollar.
Gold was already on a downward trend last week.
"As expected after gold's six weeks of rising prices, gold took a well earned rest last week and was down by a marginal $1.50 for the week," said Mark O'Byrne, director of Gold and Silver Investments, in a note. "Continuing consolidation may be expected," he said.
Metals mining shares were also under pressure, with the Amex Gold Bugs Index Delayed quote dataAdd to portfolio.Among other metals on Nymex, December silver fell 12 cents to $13.25 an ounce, and January platinum lost $14.6 to 1,375.20 an ounce.
December Palladium fell $4.65 to $364.85 an ounce, while December copper lost 10.35 cents to $3.5930 a pound.
A stronger U.S. currency makes dollar-denominated commodities, such as gold, more expensive. The dollar found support Friday after an upbeat September jobs report eased concerns about a U.S. recesssion.
"A few market ships hit some rough waters this Columbus Day, and gold's was one of them," said Jon Nadler, analyst a Kitco, in a note. "What started as a mild decline in values overnight in Asia, soon turned to more serious selling as local stocks took to flight after the U.S. employment data hit with full bullish impact."
And with no data on Monday, the dollar index, which measures the greenback against a basket of key currencies, rose 0.6%.
The strength of the U.S. currency Monday came amid a meeting of European finance ministers, who are trying to apply downward pressure on the euro. The euro has risen to record highs due to a sliding dollar.
Gold was already on a downward trend last week.
"As expected after gold's six weeks of rising prices, gold took a well earned rest last week and was down by a marginal $1.50 for the week," said Mark O'Byrne, director of Gold and Silver Investments, in a note. "Continuing consolidation may be expected," he said.
Metals mining shares were also under pressure, with the Amex Gold Bugs Index Delayed quote dataAdd to portfolio.Among other metals on Nymex, December silver fell 12 cents to $13.25 an ounce, and January platinum lost $14.6 to 1,375.20 an ounce.
December Palladium fell $4.65 to $364.85 an ounce, while December copper lost 10.35 cents to $3.5930 a pound.
Dollar rise: all that glisters is not gold
THE dollar has burst through US90 cents for the first time in almost a generation, delivering a windfall for motorists and overseas holidaymakers, but another blow for drought-burdened farmers and manufacturers competing in world markets.
Not for 23 years has the currency had as much muscle as it did at 3.40pm yesterday, when it reached a high of US90.33 cents.
With the economy bouncing along on the back of booming Asia, economists are tipping it to sail higher and possibly to reach parity with its US counterpart.
CommSec's chief equities economist, Craig James, said the dollar's appreciation was already generating savings on petrol. Over the past seven weeks the international price had risen by about 7 cents a litre, but at the bowser it had edged up by less than 1 cent.
"The difference is the stellar Australian dollar, soaring from US78 cents to US90 cents," Mr James said.
But the dollar's ascent is not all good news. The higher dollar is partly driven by expectations about interest rates, and there is mounting speculation the Reserve Bank board could lift interest rates as soon as next month.
The Treasurer, Peter Costello, said the dollar's rise was a mixed blessing for the economy. It shielded consumers from rising fuel prices, but "all things considered a strong currency … is not all that good for your economy". The strong dollar meant exporters needed to be more competitive because their goods were more expensive in international markets.
The buoyant currency is also mixed news for overseas travellers. It boosts the spending power of Australian tourists abroad, but hurts expatriate Australians who are paid in foreign currencies.
Economists are increasingly confident the dollar will, after a few dips along the way, settle somewhere above US90 cents.
Clifford Bennett from Sonray Capital Markets has been predicting parity with the US dollar for more than a year. He said the dollar's ascent had been fuelled by a sea-change in global currency markets.
With the US dollar in seemingly terminal decline, international investors were looking for alternative locations to park their money. "The Aussie dollar is shining bright on the radar" for investors, Mr Bennett said.
This was due to Australia's proximity to the fast-growing economies of China and India and its relatively sophisticated and well-regulated financial markets.
Citigroup's director of economic and market analysis, Stephen Halmarick, forecast the dollar to stabilise around US90 cents in the first half of next year.
The chief currency strategist at Westpac, Robert Rennie, predicted the dollar would rise "onwards and upwards to US92 cents" by the middle of next year, but would not rise much beyond that. The chief economist at Austrade, Tim Harcourt, said some exporters were doing it tough with the higher currency, but many were resilient, with long-term plans for exports and strong relations with clients.
"Some exporters also undertake 'hedging' in their contacts to mitigate against changes in the exchange rate - that is, they take out insurance," he said.
Not for 23 years has the currency had as much muscle as it did at 3.40pm yesterday, when it reached a high of US90.33 cents.
With the economy bouncing along on the back of booming Asia, economists are tipping it to sail higher and possibly to reach parity with its US counterpart.
CommSec's chief equities economist, Craig James, said the dollar's appreciation was already generating savings on petrol. Over the past seven weeks the international price had risen by about 7 cents a litre, but at the bowser it had edged up by less than 1 cent.
"The difference is the stellar Australian dollar, soaring from US78 cents to US90 cents," Mr James said.
But the dollar's ascent is not all good news. The higher dollar is partly driven by expectations about interest rates, and there is mounting speculation the Reserve Bank board could lift interest rates as soon as next month.
The Treasurer, Peter Costello, said the dollar's rise was a mixed blessing for the economy. It shielded consumers from rising fuel prices, but "all things considered a strong currency … is not all that good for your economy". The strong dollar meant exporters needed to be more competitive because their goods were more expensive in international markets.
The buoyant currency is also mixed news for overseas travellers. It boosts the spending power of Australian tourists abroad, but hurts expatriate Australians who are paid in foreign currencies.
Economists are increasingly confident the dollar will, after a few dips along the way, settle somewhere above US90 cents.
Clifford Bennett from Sonray Capital Markets has been predicting parity with the US dollar for more than a year. He said the dollar's ascent had been fuelled by a sea-change in global currency markets.
With the US dollar in seemingly terminal decline, international investors were looking for alternative locations to park their money. "The Aussie dollar is shining bright on the radar" for investors, Mr Bennett said.
This was due to Australia's proximity to the fast-growing economies of China and India and its relatively sophisticated and well-regulated financial markets.
Citigroup's director of economic and market analysis, Stephen Halmarick, forecast the dollar to stabilise around US90 cents in the first half of next year.
The chief currency strategist at Westpac, Robert Rennie, predicted the dollar would rise "onwards and upwards to US92 cents" by the middle of next year, but would not rise much beyond that. The chief economist at Austrade, Tim Harcourt, said some exporters were doing it tough with the higher currency, but many were resilient, with long-term plans for exports and strong relations with clients.
"Some exporters also undertake 'hedging' in their contacts to mitigate against changes in the exchange rate - that is, they take out insurance," he said.
Sunday, October 7, 2007
Declining dollar: Who wins, who loses
NEW YORK (CNNMoney.com) -- With the dollar's further fall all but certain, the winners and losers are starting to come into clearer focus.
The dollar fell sharply against the euro after the Federal Reserve cut interest rates at its policy meeting on Tuesday, extending its decline over the past few years. Since the central bank's action, the euro has continued to set new record highs, climbing above $1.41 for the first time ever Friday.
The dip could prove a big boost for marquee U.S. businesses that operate overseas, such as General Motors , McDonald's or Boeing Co. , and will see a "windfall" as a weaker greenback increases the dollar value of their overseas sales, says Michael Strauss, chief economist at the fund manager Commonfund.
But maybe the biggest beneficiaries of a weakened dollar are U.S. exporters, as domestically produced goods become cheap in the eyes of foreign buyers.
David Kelly, managing director and economic adviser for Putnam Investments, notes that higher exports will help trim the United States' bloated trade and current account deficits.
"[The dollar] will continue to fall until we see a sea change in the U.S. trade deficit," he said.
How fall will the dollar fall?
Currency experts, such as Ezechiel Copic, a senior currency analyst at IDEAGlobal in New York, are betting the euro will hit $1.45 by year's end.
But a continued drop in the dollar's value against the euro could prompt European politicians and economic officials to demand that the European Central Bank cut its own interest rates to keep the euro in check.
"I think anywhere between $1.45 and $1.50 we will hear some serious pain," said Copic.
In the United States, a battered dollar is certain to contribute to inflation and squeeze Americans' pocketbooks.
A weaker U.S. currency, besides pushing up the price of foreign goods, also drives up the price of commodities priced in dollars, such as oil, which has a big impact on consumer spending by Americans.
But a weaker dollar will also hurt overseas businesses. Companies that export goods to the United States may not only face weakened demand, they could also suffer tighter profit margins.
Commonfund's Strauss believes that many foreign firms have probably already accounted for the dollar's recent decline in their financial forecasts. Still, he warned, many of them will struggle - threatening economies overseas.
"That might be more important than our inflationary effect," he said.
The dollar fell sharply against the euro after the Federal Reserve cut interest rates at its policy meeting on Tuesday, extending its decline over the past few years. Since the central bank's action, the euro has continued to set new record highs, climbing above $1.41 for the first time ever Friday.
The dip could prove a big boost for marquee U.S. businesses that operate overseas, such as General Motors , McDonald's or Boeing Co. , and will see a "windfall" as a weaker greenback increases the dollar value of their overseas sales, says Michael Strauss, chief economist at the fund manager Commonfund.
But maybe the biggest beneficiaries of a weakened dollar are U.S. exporters, as domestically produced goods become cheap in the eyes of foreign buyers.
David Kelly, managing director and economic adviser for Putnam Investments, notes that higher exports will help trim the United States' bloated trade and current account deficits.
"[The dollar] will continue to fall until we see a sea change in the U.S. trade deficit," he said.
How fall will the dollar fall?
Currency experts, such as Ezechiel Copic, a senior currency analyst at IDEAGlobal in New York, are betting the euro will hit $1.45 by year's end.
But a continued drop in the dollar's value against the euro could prompt European politicians and economic officials to demand that the European Central Bank cut its own interest rates to keep the euro in check.
"I think anywhere between $1.45 and $1.50 we will hear some serious pain," said Copic.
In the United States, a battered dollar is certain to contribute to inflation and squeeze Americans' pocketbooks.
A weaker U.S. currency, besides pushing up the price of foreign goods, also drives up the price of commodities priced in dollars, such as oil, which has a big impact on consumer spending by Americans.
But a weaker dollar will also hurt overseas businesses. Companies that export goods to the United States may not only face weakened demand, they could also suffer tighter profit margins.
Commonfund's Strauss believes that many foreign firms have probably already accounted for the dollar's recent decline in their financial forecasts. Still, he warned, many of them will struggle - threatening economies overseas.
"That might be more important than our inflationary effect," he said.
Wall Street cheers jobs report
NEW YORK (CNNMoney.com) -- Stocks rose Friday morning and bonds slumped after a strong September jobs report reassured investors that the economy is not headed for a recession.
The Dow Jones industrial average gained 0.5 percent around 40 minutes into the session. The broader S&P 500 index added about 0.5 percent and hovered within 6 points of a new all-time trading high.
The tech-heavy Nasdaq composite gained around 0.7 percent. Should it close where it stood at 10:15 a.m. ET, it would be at a fresh 2007 record and the highest close since Feb. 2001.
Employers added 110,000 jobs to their payrolls in August, just topping forecasts for a rise of 100,000. In addition, the August number was revised to a gain of 89,000 jobs from the originally reported loss of 4,000 jobs.
Despite the gain in payrolls, the unemployment rate, which is generated by a separate survey, rose to 4.7 percent in the month from 4.6 percent in the previous month. The gain was as expected.
The report seemed to hit that middle ground that stock investors crave, suggesting the economy is holding up, but not accelerating too quickly.
However, stock gains may have been limited by the realization that the report seems to diminish the likelihood of the Federal Reserve cutting interest rates at its next policy meeting at the end of the month.
The report's inflation component seemed to support the Fed holding off. Average hourly earnings rose 0.4 percent after rising 0.3 percent in August. Economists thought wages would rise 0.3 percent.
Treasury prices slumped, boosting the corresponding yields, on bets that the strong economic news means the Federal Reserve is unlikely to cut interest rates further at its next policy meeting. The selloff lifted the yield on the 10-year note to 4.60 percent from 4.51 percent late Thursday.
In corporate news, Merrill Lynch joined the recent parade of financial stocks warning about the earnings impact from the fallout in the housing and credit markets. Merrill said it will post a third-quarter net loss and will write down $5 billion.
Nonetheless, Merrill shares rose, with investors continuing to reward financial stocks for not disappointing them more with their earnings. In addition, a sense that the worst is over for the sector has helped the stocks recently.
Late Thursday, Research in Motion reported higher quarterly earnings and revenue that beat expectations. The blackberry maker also boosted its current-quarter profit forecast. Shares jumped Friday morning.
Also after the close Thursday, Alcoa said it will sell two of its divisions and that it will restructure another one. Shares of the Dow component rose 2 percent Friday morning.
U.S. light crude for November delivery fell 58 cents to $80.86 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $3.80 to $740 an ounce.
The Dow Jones industrial average gained 0.5 percent around 40 minutes into the session. The broader S&P 500 index added about 0.5 percent and hovered within 6 points of a new all-time trading high.
The tech-heavy Nasdaq composite gained around 0.7 percent. Should it close where it stood at 10:15 a.m. ET, it would be at a fresh 2007 record and the highest close since Feb. 2001.
Employers added 110,000 jobs to their payrolls in August, just topping forecasts for a rise of 100,000. In addition, the August number was revised to a gain of 89,000 jobs from the originally reported loss of 4,000 jobs.
Despite the gain in payrolls, the unemployment rate, which is generated by a separate survey, rose to 4.7 percent in the month from 4.6 percent in the previous month. The gain was as expected.
The report seemed to hit that middle ground that stock investors crave, suggesting the economy is holding up, but not accelerating too quickly.
However, stock gains may have been limited by the realization that the report seems to diminish the likelihood of the Federal Reserve cutting interest rates at its next policy meeting at the end of the month.
The report's inflation component seemed to support the Fed holding off. Average hourly earnings rose 0.4 percent after rising 0.3 percent in August. Economists thought wages would rise 0.3 percent.
Treasury prices slumped, boosting the corresponding yields, on bets that the strong economic news means the Federal Reserve is unlikely to cut interest rates further at its next policy meeting. The selloff lifted the yield on the 10-year note to 4.60 percent from 4.51 percent late Thursday.
In corporate news, Merrill Lynch joined the recent parade of financial stocks warning about the earnings impact from the fallout in the housing and credit markets. Merrill said it will post a third-quarter net loss and will write down $5 billion.
Nonetheless, Merrill shares rose, with investors continuing to reward financial stocks for not disappointing them more with their earnings. In addition, a sense that the worst is over for the sector has helped the stocks recently.
Late Thursday, Research in Motion reported higher quarterly earnings and revenue that beat expectations. The blackberry maker also boosted its current-quarter profit forecast. Shares jumped Friday morning.
Also after the close Thursday, Alcoa said it will sell two of its divisions and that it will restructure another one. Shares of the Dow component rose 2 percent Friday morning.
U.S. light crude for November delivery fell 58 cents to $80.86 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $3.80 to $740 an ounce.
European officials fret over U.S. economy
BRUSSELS, Belgium (AP) -- European Union finance ministers open two days of talks Monday to discuss the United States' slowing economy, feeble dollar and massive current account deficit as major problems for the EU and the rest of the world.
Europe is starting to feel the bite as the U.S. dollar plummets, making French wine, Italian fashion and German cars expensive purchases for the EU's main export market in the United States.
Last week, the employers federation BusinessEurope said that, by crossing 1.40 against the U.S. dollar, the euro exchange rate had reached a "pain threshold" for European companies. It also complained the euro was appreciating too fast against the Chinese yuan and Japanese yen.
While echoing their concern, the finance ministers of the 13 euro-zone nations will reiterate Europe is an innocent victim of others and that the euro-dollar exchange rate issue is part of a broader set of problems triggered by China's trade surplus and America's huge debts that require concerted steps to undo.
Luxembourg's Prime Minister Jean-Claude Juncker set the tone last week when he said the Europeans should not have to bear the consequences of other countries' inaction.
Finance ministers from all 27 EU nations on Tuesday will lift a caution for London that was imposed when it ran a budget deficit above the EU's recommended 3 percent of gross domestic product. The recent economic surge should allow Britain to cut that to 2.4 percent in the 2008-2009 financial year.
The Czech Republic will see its budget warning stepped up, as it is told to cut its deficit to zero within five years. This year, the deficit is likely to overrun a forecast of 3.3 percent as it counts the cost of higher social welfare spending by the previous government. The country needs to get well below 3 percent to join the euro as Prague plans for 2012.
Since the currency's launch in 2002, the European Commission has urged the nations that use the euro to do more to coordinate their economic moves and cut spending.
It says the euro is already paying off because the euro-zone has become more resilient to outside shocks, such as last year's oil price spikes.
But the possibilities of a worsening U.S. slowdown, higher oil prices and tighter borrowing conditions could all risk derailing Europe's first bloom of growth after several years of stagnancy.
The EU executive sees a more uncertain future in the months ahead, downgrading a forecast for the economy to grow this year from 2.6 percent to 2.5 percent after global financial turmoil sparked by mounting bad loans to U.S. homeowners.
To help remedy the risk of a financial crisis, it is calling for more scrutiny of how banks repackage and sell loans - particularly those made to people with no money, job or assets - as investments that were rated as sound by credit rating agencies Standard & Poor's Corp., Moody's Investors Service Inc. and Fitch Ratings.
EU finance ministers will set out their line on these measures before a meeting of G-7 and International Monetary Fund finance ministers and central bank chiefs in Washington later this month.
Unlike the dollar or the yen - or even the British pound - the euro does not have its own representative at global economy talks, so euro nations and the EU executive try to thrash out their views ahead of time. Euro members France, Germany and Italy take part in the selective G-7 talks with the United States, Japan, Canada and non-euro Britain.
Europe is starting to feel the bite as the U.S. dollar plummets, making French wine, Italian fashion and German cars expensive purchases for the EU's main export market in the United States.
Last week, the employers federation BusinessEurope said that, by crossing 1.40 against the U.S. dollar, the euro exchange rate had reached a "pain threshold" for European companies. It also complained the euro was appreciating too fast against the Chinese yuan and Japanese yen.
While echoing their concern, the finance ministers of the 13 euro-zone nations will reiterate Europe is an innocent victim of others and that the euro-dollar exchange rate issue is part of a broader set of problems triggered by China's trade surplus and America's huge debts that require concerted steps to undo.
Luxembourg's Prime Minister Jean-Claude Juncker set the tone last week when he said the Europeans should not have to bear the consequences of other countries' inaction.
Finance ministers from all 27 EU nations on Tuesday will lift a caution for London that was imposed when it ran a budget deficit above the EU's recommended 3 percent of gross domestic product. The recent economic surge should allow Britain to cut that to 2.4 percent in the 2008-2009 financial year.
The Czech Republic will see its budget warning stepped up, as it is told to cut its deficit to zero within five years. This year, the deficit is likely to overrun a forecast of 3.3 percent as it counts the cost of higher social welfare spending by the previous government. The country needs to get well below 3 percent to join the euro as Prague plans for 2012.
Since the currency's launch in 2002, the European Commission has urged the nations that use the euro to do more to coordinate their economic moves and cut spending.
It says the euro is already paying off because the euro-zone has become more resilient to outside shocks, such as last year's oil price spikes.
But the possibilities of a worsening U.S. slowdown, higher oil prices and tighter borrowing conditions could all risk derailing Europe's first bloom of growth after several years of stagnancy.
The EU executive sees a more uncertain future in the months ahead, downgrading a forecast for the economy to grow this year from 2.6 percent to 2.5 percent after global financial turmoil sparked by mounting bad loans to U.S. homeowners.
To help remedy the risk of a financial crisis, it is calling for more scrutiny of how banks repackage and sell loans - particularly those made to people with no money, job or assets - as investments that were rated as sound by credit rating agencies Standard & Poor's Corp., Moody's Investors Service Inc. and Fitch Ratings.
EU finance ministers will set out their line on these measures before a meeting of G-7 and International Monetary Fund finance ministers and central bank chiefs in Washington later this month.
Unlike the dollar or the yen - or even the British pound - the euro does not have its own representative at global economy talks, so euro nations and the EU executive try to thrash out their views ahead of time. Euro members France, Germany and Italy take part in the selective G-7 talks with the United States, Japan, Canada and non-euro Britain.
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