Moving to shore up the ?fragile and uneven? recovery, officials from the world?s 20 biggest economies promised Saturday to refrain from weakening their currencies, agreeing to let the markets exert more influence in setting foreign exchange rates.
The officials also decided to give fast-growing countries a greater say at the International Monetary Fund, which monitors nations? fiscal and monetary policies, an acknowledgment that the fund?s credibility required more representation from these nations. They also strengthened the I.M.F.?s role in assessing whether G-20 members were meeting their commitments.
The finance ministers and central bankers were at a two-day meeting in Gyeongju, South Korea, and their actions represented another step in the effort to bridge the diverging priorities of the leading economies and ease the strain of simmering disputes.
The intense talks ? built largely around an agenda the Americans brought to the meeting ? yielded more consensus than many officials had expected. In general, the United States refrained from putting more public pressure on China to revalue its currency, preferring instead to emphasize the benefits of reducing trade imbalances.
Seeking to find common ground on currency valuation, officials agreed to ?move toward more market-determined exchange rate systems that reflect underlying economic fundamentals.? And they pledged to ?refrain from competitive devaluation of currencies? ? an effort to calm anxiety over a wave of protectionism in which countries would weaken their currencies to bolster their own exports.
Threats of such a ?currency war? have unsettled markets and threatened to hinder a flagging global recovery.
The language adopted Saturday was the strongest yet from the G-20, which operates through consensus and peer pressure but lacks binding authority, following warnings by the United States that rapidly developing countries were trying to keep their currencies from rising, setting off a ?damaging cycle? of ?competitive nonappreciation.?
For their part, the richest countries, like the United States and Britain, both with large deficits, agreed to be ?vigilant against excess volatility and disorderly movements in exchange rates.?
On the issue of trade, the United States failed to secure support for a numerical limit on the surplus or deficit of the nations? current account balances, the broadest measure of a country?s trade and investment. The Americans had proposed that surplus and deficits be reduced to less than 4 percent of gross domestic product by 2015.
Such a deal would have obliged two export giants, China and Germany, to stimulate domestic consumption and rely less on foreign consumers. China in particular would have faced new pressure to let its currency, the renminbi, rise against the dollar.
Instead, G-20 members pledged to ?pursue the full range of policies conducive to reducing excessive imbalances.?
That language was not as firm as Treasury Secretary Timothy F. Geithner had sought, but he called the pledge a step forward.
?The most important thing we achieved is agreement on a framework for curbing excess trade imbalances in the future,? Mr. Geithner said. On Sunday, he will make a previously unannounced trip to Qingdao, China, where he was to meet with Wang Qishan, the Chinese vice premier for economic issues.
The French finance minister, Christine Lagarde, said that Mr. Geithner ?probably would have liked specific targets,? but Olli Rehn, Europe?s economic and monetary affairs commissioner, said that ?setting specific numerical targets would have been easily counterproductive.?
Germany, Russia and Italy were among the countries that opposed the 4 percent proposal, officials said.
One significant development was the agreement on changes to how the I.M.F. is run. The G-20 agreed to transfer more than 6 percent of voting power within the I.M.F. to ?dynamic emerging-market and developing countries? like Brazil and India by the fall of 2012.
?The legitimacy of the I.M.F. is increasing,? Pranab Mukherjee, the Indian finance minister, said approvingly.
China will become the fund?s third-largest shareholder, behind the United States and Japan but ahead of Germany, France and Britain. Europe agreed to surrender two seats on the 24-member executive board.
As part of a package deal, the G-20 agreed to double the I.M.F.?s quotas, which determine how much each country contributes to ? and may borrow from ? the institution. The quotas presently total about $340 billion.
The G-20 also continued to increase the role of the I.M.F. as a watchdog over its member economies in the hope that it might help arbitrate thorny trade and currency disputes. Officials agreed to empower the I.M.F. to investigate the ?persistently large imbalances? and determine ?the root causes? of why adjustment had been so hard to achieve.
Like the G-20, the I.M.F. cannot compel members to act, but its findings carry great weight.
Yoon Jeung-hyun, the South Korean finance minister, said the agreement would help remove ?uncertainty in the global markets such as the foreign exchange rate issues.? He added, ?This will put an end to the controversy over foreign exchange rates.?
George Osborne, Britain?s chancellor of the Exchequer, was not quite so optimistic, though he praised the accord, saying ?this language calms everything down and gives us a route map for resolving these imbalances.?
Not everyone was happy with the Americans. Several officials expressed concerns to Ben S. Bernanke, the Federal Reserve chairman, that the Fed would pour more money into the economy to stop inflation from falling and to stimulate growth, thus weakening the dollar.
?Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,? the German economy minister, Rainer Br�derle, warned, in effect accusing the United States of the same type of currency weakening for which China has been criticized. At a news conference, Mr. Geithner dismissed the anxiety, saying, ?The policy of the United States is to support a strong dollar.?
Nevertheless, the Fed?s policy is sure to come up again next month when world leaders, including President Obama, meet at G-20 talks in Seoul.
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.