(repeats removing 'hold' in slug
* Almunia says excessive forex volatility bad for everyone
* Calls for major economies to coordinate on forex
* Says over-hasty withdrawal of monetary stimulus would be
negative
* Says growth in public debt unsustainable
(Adds quotes)
By Jason Webb
PAMPLONA, Spain, Oct 29 (Reuters) - The EU's top economic official on Thursday said major economies should coordinate to limit volatility in foreign exchange markets.
"Excessive volatility isn't good for anyone," the European commissioner for the economy Joaquin Almunia told reporters in the Spanish city of Pamplona when asked by Reuters whether he was concerned about the depreciation of the U.S. dollar.
"What we have to do is to maintain the coordination between the main economies of the world, as we do in the G7 and the G20, and exchange rates should be the product of flexible mechanisms .... in tune with market fundamentals," he said.
The steep decline in the dollar has caused concern in economies around the world that their nascent economic recoveries could suffer by being priced out of U.S. markets.
In a speech at the same event, Almunia recognised there was a debate about the place of the dollar as the world's main reserve currency. Chinese and Russian officials, concerned by huge structural imbalances including a long period of U.S. current account deficits, have publicly explored the possibility of seeking a replacement for the dollar based on IMF special drawing rights.
The euro rose some six percent in under two months to break above the psychologically key $1.50 level earlier in October for the first time in over a year. It has since fallen back slightly and was last trading around $1.4750.
In Europe, euro strength is already producing complaints.
The chief financial officer of German carmaker Daimler AG
European officials and businesses are also worried by what they perceive as chronically undervalued Asian currencies. European Central Bank governing council member Christian Noyer told Wednesday's edition of French business daily Les Echos that restrictions on capital movements by rising trade powers to keep their currencies low was the main problem in foreign exchange markets.
Almunia said the strength of the single currency would increase pressure on European economies to make reforms to become more competitive and avert the risk of declining European influence in the world.
"The euro is today a strong currency, a viable currency, a currency that protects us but it is a currency that will not help us to significantly improve our competitiveness via the exchange rate," he said.
With euro devaluation out of the question, Europe must urgently address major structural issues, Almunia said, singling out the need for Germany to rebalance its growth towards domestic consumption and for France to cut the size of its public sector.
Almunia said economic recovery looked near, but warned the ECB not to withdraw monetary stimulus before governments have a clear exit strategy for their anti-crisis spending programmes.
"If that monetary policy begins to tighten, and expansionary measures begin to be withdrawn before there is a clear consolidation strategy for countries' fiscal and budget policies the consequences would be negative for the great majority," he said.
He stressed the current growth in public debt around the world was unsustainable and both central banks and governments needed to have clear exit strategies for withdrawing stimulus.
"We have to decide now on how to withdraw them when the time arrives, but it is not a matter of indifference whether the fiscal stimilus is withdrawn before the monetary stimulus," he said. (Reporting by Jason Webb; editing by Chris Pizzey)