Central banks warn U.S. on massive deficits

LONDON — Some of the world’s major central bankers warned the United States on Friday that the international community could be running out of patience with the massive U.S. budget and trade deficits that have pushed the dollar lower and increased the cost of their exports in America.

But U.S. Federal Reserve Chairman Alan Greenspan said before the official opening of the Group of Seven finance ministers meeting that factors including the weaker dollar and tougher budget discipline in Congress may finally start to restrain the growth of the trade gap.

America’s own campaign to push China to untie its currency from the dollar as quickly as possible appeared to make little headway.

European Central Bank president Jean-Claude Trichet said at a conference of business leaders and government officials that it was unacceptable for developed countries to run long-term current account deficits.

“The industrialized world as a whole is in deficit, there is a current account deficit, and there is no offsetting of the U.S. current account deficit by the other industrialized countries,” Trichet said.

“That of course means that we are structurally asking the rest of the world to finance us. … It doesn’t seem to me that this is an acceptable and sustainable long-term feature of the present functioning of the global economy.”

The U.S. deficits are expected to be a significant item of discussion during talks Saturday among the ministers from the G-7 nations — Britain, Canada, France, Germany, Italy, Japan and the United States.

The Bush administration has pledged to halve the budget deficit by 2009, but also intends to argue that trade partners concerned about the deficits should speed up their own growth and rely less on exports to America.

The U.S. deficits have been a drag on the dollar, putting European and Asian manufacturers who want a slice of the key U.S. consumer market at a disadvantage. The euro rose from about $1.20 in September to a high of $1.3667 at the end of December, and the dollar tumbled from about 111 yen in September to 102 yen toward the end of the year.

While Washington insists it has a “strong dollar” policy, many analysts believe the U.S. government is content to see the dollar fall because it makes U.S. exports cheaper.