U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke talk during the G20 Finance Ministers and Central Bank Governors meeting in Gyeongju, October 22, 2010.
Credit: Reuters/Ahn Young-joon/Pool
GYEONGJU, South Korea |
GYEONGJU, South Korea (Reuters) - The Group of 20 major economies agreed on Saturday to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances that are clouding global growth prospects.
At a meeting in South Korea, G20 finance ministers recognized the quickening shift in economic power away from Western industrial nations by striking a surprise deal to give emerging nations a bigger voice in the International Monetary Fund.
A closing communique contained no major policy initiative after a U.S. proposal to limit current account imbalances to 4 percent of gross domestic product, a measure aimed squarely at shrinking China's surplus, failed to win broad enough backing.
Indeed, the United States itself came under fire from Germany and China for the super-loose monetary policy stance it has adopted to try to breathe life into the sluggish U.S. economy.
German Economy Minister Rainer Bruederle said he had made clear that easing was the wrong way to go.
"An excessive, permanent increase in money is, in my view, an indirect manipulation of the (foreign exchange) rate," he said.
HEADING FOR CHINA
The main aim of the two days of talks, which precede a G20 summit in Seoul on November 11-12, was to ease currency strains that some economists feared could escalate into trade wars.
Developing countries are worried that Washington, by flooding the U.S. banking system with cash, is pumping up their asset prices and exchange rates, thus undermining the competitiveness of the export industries on which they rely for growth.
China, among others, frets that the U.S. policy stance will debase the dollar, the lynchpin of the global economy.
In a thinly veiled reference to the United States, the G20 statement said advanced countries, including those with reserve currencies, would be vigilant against excessive volatility and disorderly movements in exchange rates.
Washington, by contrast, is frustrated over the refusal of China in particular to let its currency rise to a level that reflects its growing economic power and would help reduce its big trade surplus with the United States.
"If the world is going to be able to grow at a strong, sustainable pace in the future... then we need to work to achieve more balance in the pattern of global growth as we recover from the crisis," U.S. Treasury Secretary Timothy Geithner said.
U.S. officials were pleased that the communique committed G20 members to "refrain from competitive devaluations" of their currencies and to pursue a full range of policies to reduce excessive external imbalances.
Geithner will keep up the pressure on Sunday for a stronger yuan when he holds talks in Qingdao, China, with Vice-Premier Wang Qishan, who has broad responsibility for economic policy.
Oct 24, 2010�2:51am EDT
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Oct 24, 2010�3:13am EDT
We in India can fund, when i mean funding its not through cash but through its youth which is going to en cash much more then say china or the west .If at all the West lets India grow without controls, i am sure the young populace of India is going to boost, to the crippling world economy.
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Oct 24, 2010�3:52am EDT
Sounds like India gained the most at the expense of Western countries giving up seats at the IMF and China allowing the Yuan to float further.
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Oct 24, 2010�4:52am EDT
The United States has never signed an agreement where the interests of the American people come first. It seems like we?ve been sold out every time, as long as it benefits our trading partner(s).
One other thing, Germany is supposed to be an ally, but its fear of China and Russia is too great. Its time to close our bases in this back-stabbing country. When we leave, if it is not tied down ship it. Our leaving Germany may not make a dent in their economy, but it will be felt in certain parts. It will also send a message to other countries where we have bases a warning.
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I wonder if any of these emerging economy countries have picked up additional funding burden along with their increased control? Perhaps China can start kicking in a bit more as it?s funding is quite small considering that it has the second largest economy now.