Leaders won’t stop contemplating easing out of the dollar

Dollar’s Role Under Debate in Run-Up to G-8 Summit

By Gabriele Parussini, Dow Jones Newswires

AIX EN PROVENCE, France — France, Russia, and India questioned the role of the dollar as the world’s reserve currency during the weekend, indicating its status is likely to be a strong talking point in this week’s Group of Eight leading nations’ summit in Italy.

At a conference here this weekend French Finance Minister Christine Lagarde called for better foreign exchange policy co-ordination, hinting that the dollar’s role as a reserve currency may need to be discussed in the medium term.

Her remarks were echoed Sunday by European Central Bank board member Christian Noyer, who said: “We must ensure a bigger stability between currencies in the coming months.”

“We must avoid … the piling up of currency reserves,” and find more efficient ways of financing global trade, he added.

Also calling for change was Russian President Dmitry Medvedev, who said there should be regional reserve currencies — although he admitted there’s no alternative to the dollar and the euro at present.

In remarks to Italian journalists ahead of his trip and released by the Kremlin, he said new reserve currencies were needed but they “can’t be introduced by presidential decree or by order of the central bank. It’s about trusting countries’ economies.”

The G8 leaders will, starting Wednesday, meet with each other in the earthquake-hit city of L’Aquila and then meet the leaders of major developing economies. China has been lobbying hard for a debate on the dollar’s status at the meeting but other nations have also been saying discussion is needed.

What’s not yet clear is whether this campaign could lead to the creation of a new international reserve currency or just a diversification out of dollars into other currencies. It’s also not clear whether the G8 and other related meetings this week are likely to yield any progress because it’s a meeting of national leaders — and currency issues are usually the purview of central bankers, finance ministers, and the International Monetary Fund.

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