U.S. Faces More Tensions Abroad as Dollar Slides

After a first term in which terrorism and war dominated President Bush's foreign policy agenda, his allies in Europe and Asia suspect that his next confrontation with the world could take on a very different cast: a potential currency crisis, in which a steep plunge in the value of the dollar touches off economic waves around the world. Already, the tensions over the dollar are becoming a recurring source of friction, a conflict that does not reverberate as loudly as the differences over Iraq but may be as deeply felt. At a meeting in Paris on Monday, the finance ministers of Germany and France complained that Europe had unjustly borne the brunt of the dollar's decline, and called for coordinated action to stop it. "Europe has until now paid too big a share in this readjustment," Herv Gaymard, the French finance minister, said. His German counterpart, Hans Eichel, said the United States needed to reduce its deficits, adding "each one has to play its role." Two months ago, similar sentiments came from China's prime minister, Wen Jiabao, whose nation is at the center of a struggle with Washington over currency policy. He complained about the fall of the dollar, asking, "Shouldn't the relevant authorities be doing something about this?" [more]

• Economist: China Loses Faith in Dollar [more]