The Group of Seven meeting this month should focus on breaking down barriers to free trade rather than managing exchange rates, British finance minister Alistair Darling told Reuters in an interview on Wednesday.
Speaking a day after he revised down his forecast for British economic growth because of the global credit crunch, Darling said the troubles that started in the US housing market had spread to the rest of the world.
But he appeared to have little truck with European concerns that the dollar was too weak and that this needed to be addressed at next week's meeting of G7 finance ministers and central bankers in Washington.
Asked if currencies would be an issue and whether there would be any pressure to change G7 language on them, Darling said: "I think the G7 really needs to concentrate on perhaps some of the longer-term structural reforms that are necessary in the economies of the world."
Euro zone finance ministers this week reiterated pleas to financial markets to heed US statements that a strong dollar was in US economic interests and urged them again to take account of Japan's improving economy.
Many of them, led by France, are concerned their currency's rise to record highs against the dollar will hurt their exporters and slow their economies and are hoping the G7 might take a common stand that could help bring the euro down.
Darling, however, said Europe should concentrate on sorting out problems at home.
"The problem that Europe faces generally is that fundamental reforms are needed to reduce some of the rigidities, for example, labour markets need to be more flexible," he said.
"With regard to Europe, there have been concerns there that whilst at the beginning of this year we have seen stronger, much stronger growth in Germany, for example, that appears to have slowed down."
But Darling was upbeat about the prospects for the US economy. "The key thing is the Americans themselves are optimistic the economy will pick up and the Fed's interest rate cut will have an impact," he said.
The US Federal Reserve cut interest rates by half a point last month to bolster the economy after mass defaults on sub-prime mortgages threatened the whole financial system.
Darling on Tuesday said the British economy would grow by 3% this year but slow to a rate between 2% and 2.5% in 2008. He then sees a rebound in 2009.
"We will get through this because of the underlying strength of the British economy. The crucial thing is we maintain stability," he said.
Bank of England Governor Mervyn King on Tuesday dented expectations the central bank was about to cut British interest rates, warning that price pressures still lurk on the horizon.
Darling agreed policymakers could never be complacent. "We have to be ever vigilant about the inflationary threat," he said.
He also warned people to be more careful about how much debt they take on just as banks needed to be more guarded about who they lend to.
"Our housing market has been growing very, very strongly, there is a lot to be said for making sure that growth is sustainable," he said.
"When people come to borrow money they should be confident they can meet the repayments ... lenders have to take a realistic view on how much they are willing to lend."
He said he would be raising these issues at the G7 and International Monetary Fund meetings in Washington.
"We have made proposals which I shall be raising at the G7 and IMF which I hope right across the world will lead to people being a little more careful about what it is they enter into and the risk to which they might be exposed," Darling said.