G20 agrees deal on gauging economic disparities
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G20 nations reached a deal on which economic indicators to use in assessing economic imbalances during talks Saturday in Paris. Earlier reports indicated that China, sensitive to criticism of its overvalued currency, was reluctant to make a deal.
AFP - The G20 developed and developing countries reached a deal Saturday on which economic indicators to use to evaluate and tackle the economic imbalances at the heart of the global crisis.
French Economy Minister Christine Lagarde, who chaired the talks, said the accord marked the "first step" towards correcting these problems, thereby putting the global economy on track to more balanced growth and prosperity.
Lagarde told a press conference there had been a long debate on the indicators to be used and lengthy discussions, after reports that China, sensitive over its currency policy, was holding out against an accord.
"It was not simple," Lagarde said at the end of the two-day meeting, the first under France's G20 presidency.
A series of indicators were under discussion. Two measure imbalances within countries -- the public deficit and debt, plus the levels of private savings and debt.
The other two measure external imbalances -- the current account balance or trade balance, and foreign currency reserves or real exchange rates.
The meeting agreed the first pair but on the second there appeared to be a reservation when the communique said the trade balance and investment flows would be monitored "taking due consideration of exchange rate, fiscal, monetary and other policies."
That suggests that exchange rates will be considered only in the wider policy context, something which Beijing has always insisted should be the case in response to Western criticism.
There was no direct mention of foreign exchange reserves, and Lagarde confirmed it had been dropped following debate.
China holds the largest amount at more than $2.5 trillion -- one of the major global imbalances that has to be resolved, according to the United States and Western powers.
They charge that China keeps its currency weak to boost Chinese exports. China denies any such manipulation, blaming the imbalance on structural problems in its trade partners' economies.
Asked about the Chinese position, Lagarde said "there were talks, negotiations all night ... we found an accord that I think is balanced," adding that there could be no winners or losers if progress was to be made.
China last year resisted a US proposal to stabilise current account balances by setting a four-percent cap on countries' deficits and surpluses.
US Treasury Secretary Timothy Geithner did not mention China's exchange rate policy and said "the question of reserves is not really critical at this stage."
He said the deal on the indicators "captures the essential elements in a way that is still acceptable" and includes the "critical elements of a credible framework."
Failure to agree on the indicators could have hobbled G20 efforts to remedy the huge trade and currency imbalances at the root of the 2008 global crisis and which many believe continue to threaten disaster.
The G20, whose members account for 85 percent of total world output, became the top global forum in the wake of the 2008 crisis. Avoiding a repeat is its top priority through the early diagnosis of economic imbalances and better coordination to eliminate them.
France wanted an agreement as soon as possible so that in the second half of this year the International Monetary Fund could make economic policy recommendations to nations.
In welcoming remarks on Friday, French President Nicolas Sarkozy had warned the ministers that failure to put aside national interests and reach a deal would kill off the G20.
"The temptation to give priority to national interests is great. But let me tell you clearly -- that would be the death of the G20," said Sarkozy.