G20 fights over currencies and imbalancies
An all-day G20 planning session grew so intense that officials had to leave the door open to keep the room from overheating, underscoring deep tensions over global economic rebalancing one day before the start of a summit.
Deputies drafting a final statement to be released after the two-day Group of 20 summit concludes on Friday remained far apart on pivotal issues including currency exchange rates, G20 spokesman Kim Yoon Kyung said on Wednesday.
“We had to open the door because the debate was so animated and the room was getting hot,” he said.
Some 40 to 50 people were crammed into a small room for a 14-hour planning session on Tuesday, and voices were raised when officials discussed a framework for balanced growth that G20 leaders hope will be a cornerstone of the summit.
Kim said deputies left empty brackets in several key sections of what will become the final communique, an acknowledgement that they had yet to agree on the language. Another all-day session is scheduled for Wednesday, and will continue into Thursday if needed.
Leaders from the G20 big rich and emerging economies had high hopes that this gathering, the fifth since the financial crisis exploded in 2008, would mark the end of crisis and the beginning of a new era of global cooperation. Hosts South Korea printed banners proclaiming a slogan of “Shared Growth Beyond Crisis”.
But the crisis-forged unity has given way to sometimes clashing national policies, reflecting a multi-speed recovery from a global recession.
Most major economies are grappling with sub-par growth, leaving them reliant on exports, while emerging powers such as China and Brazil have quickly roared back to pre-crisis strength.
Stubbornly slow growth in the developed world has fuelled concern that governments and central banks will try to kickstart their economies by devaluing their currencies.
In response World Bank President Robert Zoellick this week surprised financial markets by suggesting that major powers consider gold as an indicator to set foreign exchange rates.
He told an infrastructure conference in Singapore on Wednesday he was not advocating a return to the gold standard, but it was important for policymakers to look beyond exchange rates and focus on economic fundamentals.
“We still have a lot of work to do,” U.S. President Barack Obama said in Jakarta. “One of the key steps is putting in place additional tools to encourage balanced and sustainable growth.”
Obama can expect some fierce criticism in Seoul over the U.S. Federal Reserve’s plan to spend another $600 billion (375 billion pounds) buying government bonds in an effort to reinvigorate a shaky U.S. economy.
Critics charge that the Fed ignored global repercussions — namely a weaker dollar and a flood of cheap cash that could find its way into emerging markets — and violated the cooperative spirit the G20 has worked hard to sustain.
Keeping up a drumbeat of criticism from Beijing, Xia Bin, a member of the Chinese central bank’s monetary policy committee said on Wednesday that the Fed’s move was “irresponsible” and could lead to a weaker dollar.