By Johanna Treeck

WASHINGTON (MNI) – Central bankers and finance minister are
discussing the threat of a global currency war and will find the right
tools to address rising tensions if necessary, Eurogroup Jean-Claude
Juncker told Market News International on Saturday.

“The topic is raised from various sides, including myself, and it
is raised in the context that it must be prevented because, it would
bringing disaster upon all of us,” Juncker said on the sidelines of the
IMF and World Bank meetings.

Juncker argued that there is no currency war as yet and expressed
confidence that appropriate measures would be found if tensions heated
up.

“The ministers and central bankers in charge of the key currencies
are in constant exchange with each other,” he said. “Should things drift
apart drastically, we will quickly come to a consensus about the
necessary steps to be taken.” He declined to offer details.

While an immediate accord with China appears unlikely, Juncker said
that he expects to see some more flexibility in the yuan exchange rate
ahead.

“We are in talks with the Chinese: last week I spoke to the Chinese
prime minister in Brussels and here I am meeting the Chinese finance
minister,” he said. “It is not likely a spontaneous consensus with the
Chinese will emerge.”

“But still, the Chinese remain committed to their announcement of
19 June that said they will keep their currency more flexible, and that
is what they will continue to do,” he added.

Last week Juncker stressed that the yuan was significantly
undervalued.

In a separate interview with the Luxembourg daily Wort, Juncker
warned authorities in the dollar and yen zones against unilateral
exchange rate intervention, noting that “Europe is not taking part in
the brewing conflict.”

The newspaper also cited European Central Bank Governing Council
member Yves Mersch as saying that the existing global currency system
need not be altered and that discussions over a new system are
“unnecessary,” provided each country tackles its structural problems and
applies reforms to boost growth.

Closer to home, Juncker told Market News that he does “not like the
volatility currently surrounding the euro’s exchange rate.”

So far the appreciation of the euro has not endangered the
recovery, Juncker said. “Too strong a euro, however, may perhaps not
undermine but certainly hamper the recovery. But this level has not been
reached yet.”

Countries like Germany will find it easier to digest the rising
exchange rates than weaker economies on the periphery, for which it
“would certainly be more beneficial if the value of the euro would
recede,” Juncker said.

— Frankfurt bureau: +49-69-720 142. Email: jtreeck@marketnews.com —

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