Finance Leaders Call for Exchange Rate Flexibility; IMF Says a Few Bearing Brunt of Turbulence.
Finance leaders of the world's 20 biggest economies called Sunday for greater exchange rate flexibility from countries with large current account surpluses in an apparent reference to China.
China, a member of the group known as the G20, had been expected to come under pressure at the group's two-day meeting in South Africa to re-value its tightly controlled yuan, which has remained stationary while other currencies, such as the Canadian dollar, the euro and Brazil's real, have soared.
But France's finance minister, Christine Lagarde, said that in the group discussions "we did not specifically point a finger at any particular currency."
Meanwhile, the new managing director of the International Monetary Fund, Dominique Strauss-Kahn, promised to resolve or make substantial progress within months on developing countries' two-year-old demands for a bigger voice in that institution.
The Group of 20 warned of a likely slowdown in global economic growth but said it was expected to be modest. "Its extent and duration remains difficult to predict," said a communique ending the two-day summit of finance ministers and central bank governors from the world's most developed and emerging economies.
They resolved to work in concert to resolve the currency problems but provided no prescription. "We also agreed that an orderly unwinding of global imbalances, while sustaining global growth, is a shared responsibility," the communique said.
The global imbalance, driven partly by the huge current account deficit of the United States and higher commodity prices, has produced large current account surpluses and benefited currencies in several emerging economies, especially China.
The United States, with the dollar slumping to historic lows, has said China must ease its control of the yuan and was expected to be joined in that demand for the first time by European leaders at the conference.
"The currencies need to be in such an equilibrium where it facilitates trade," Lagarde, the French finance minister, told reporters. Strauss-Kahn said, "Another concern is some countries have on their shoulders a much larger part of the burden than they should -- the Canadian dollar, the euro, the Brazilian currency."
To rebalance the global economy, the G20 recommended:
- Steps to boost national saving in the United States.
- Further progress on growth-enhancing reforms in Europe.
- Further structural reforms and fiscal consolidation in Japan.
- Reforms to boost domestic demand in emerging Asia, together with greater exchange rate flexibility in a number of countries with current account surpluses.
- Increased spending in oil-producing countries.
The group called for better financial supervision and management of financial risks. It appointed a committee to study the current economic turbulence, saying there are "important new lessons" to be learned from understanding the origins and the way financial shocks are transmitted.
Delegates said they were pleased by the resilience of emerging markets and other developing countries to the recent economic trouble. Lagarde said it could be a result of IMF oversight and suggested developing countries could benefit from this.
The meeting also discussed the economic implications of climate change. South Africa's finance minister, Trevor Manuel, pointed to climate change affecting wheat production in Australia and said there was global concern about higher food and energy prices.
Strauss-Kahn said the G20 was agreed that developing nations should have a bigger quota and voice in the IMF, where, under a system devised 63 years ago, richer countries have more power. The weight of each nation's vote is tied to its quota, or financial commitments to the institution, which are determined by the sizes of their economies and currency reserves and openness to trade and capital flows.
"The fund needs to be reshaped," Strauss-Kahn said. "Times have changed. Some emerging countries have much more economic influence than they had." What could not be agreed was which nations would give up quotas and votes, he said. "The result must be a shift in quotas from developing countries to emerging ones. The question is how big is this shift going to be -- who is going to lose (some quotas), who's going to win."
The G20 brings together developed and emerging economies that together represent two-thirds of the world's population, 90 percent of gross domestic product and more than 80 percent of world trade.
Finance leaders of the world's 20 biggest economies called Sunday for greater exchange rate flexibility from countries with large current account surpluses in an apparent reference to China.
China, a member of the group known as the G20, had been expected to come under pressure at the group's two-day meeting in South Africa to re-value its tightly controlled yuan, which has remained stationary while other currencies, such as the Canadian dollar, the euro and Brazil's real, have soared.
But France's finance minister, Christine Lagarde, said that in the group discussions "we did not specifically point a finger at any particular currency."
Meanwhile, the new managing director of the International Monetary Fund, Dominique Strauss-Kahn, promised to resolve or make substantial progress within months on developing countries' two-year-old demands for a bigger voice in that institution.
The Group of 20 warned of a likely slowdown in global economic growth but said it was expected to be modest. "Its extent and duration remains difficult to predict," said a communique ending the two-day summit of finance ministers and central bank governors from the world's most developed and emerging economies.
They resolved to work in concert to resolve the currency problems but provided no prescription. "We also agreed that an orderly unwinding of global imbalances, while sustaining global growth, is a shared responsibility," the communique said.
The global imbalance, driven partly by the huge current account deficit of the United States and higher commodity prices, has produced large current account surpluses and benefited currencies in several emerging economies, especially China.
The United States, with the dollar slumping to historic lows, has said China must ease its control of the yuan and was expected to be joined in that demand for the first time by European leaders at the conference.
"The currencies need to be in such an equilibrium where it facilitates trade," Lagarde, the French finance minister, told reporters. Strauss-Kahn said, "Another concern is some countries have on their shoulders a much larger part of the burden than they should -- the Canadian dollar, the euro, the Brazilian currency."
To rebalance the global economy, the G20 recommended:
- Steps to boost national saving in the United States.
- Further progress on growth-enhancing reforms in Europe.
- Further structural reforms and fiscal consolidation in Japan.
- Reforms to boost domestic demand in emerging Asia, together with greater exchange rate flexibility in a number of countries with current account surpluses.
- Increased spending in oil-producing countries.
The group called for better financial supervision and management of financial risks. It appointed a committee to study the current economic turbulence, saying there are "important new lessons" to be learned from understanding the origins and the way financial shocks are transmitted.
Delegates said they were pleased by the resilience of emerging markets and other developing countries to the recent economic trouble. Lagarde said it could be a result of IMF oversight and suggested developing countries could benefit from this.
The meeting also discussed the economic implications of climate change. South Africa's finance minister, Trevor Manuel, pointed to climate change affecting wheat production in Australia and said there was global concern about higher food and energy prices.
Strauss-Kahn said the G20 was agreed that developing nations should have a bigger quota and voice in the IMF, where, under a system devised 63 years ago, richer countries have more power. The weight of each nation's vote is tied to its quota, or financial commitments to the institution, which are determined by the sizes of their economies and currency reserves and openness to trade and capital flows.
"The fund needs to be reshaped," Strauss-Kahn said. "Times have changed. Some emerging countries have much more economic influence than they had." What could not be agreed was which nations would give up quotas and votes, he said. "The result must be a shift in quotas from developing countries to emerging ones. The question is how big is this shift going to be -- who is going to lose (some quotas), who's going to win."
The G20 brings together developed and emerging economies that together represent two-thirds of the world's population, 90 percent of gross domestic product and more than 80 percent of world trade.
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