G-20 Ministers Squabble Over Steps to Diagnose Global Economic Imbalances
French Finance Minister Christine Lagarde
Michele Tantussi/Bloomberg
French Finance Minister Christine Lagarde said she’s hoping for an accord on which indicators should be used to analyze imbalances that economists blame in part for the financial crisis.
French Finance Minister Christine Lagarde said she’s hoping for an accord on which indicators should be used to analyze imbalances that economists blame in part for the financial crisis. Photographer: Michele Tantussi/Bloomberg
Feb. 17 (Bloomberg) -- Christian de Boissieu, president of the Council of Economic Analysis, a Paris-based panel of economists that advises the French government, talks about the outlook for the Group of 20 Finance ministers' meeting. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
Feb. 16 (Bloomberg) -- Greg Anderson, currency strategist at Citigroup Inc., talks about the outlook for the Feb. 18-19 meeting of Group of 20 finance ministers and central bankers, Federal Reserve monetary policy, the U.S. dollar and some of his currency picks, including the Swedish krona, Norwegian krone, Australian dollar, Mexican peso, Brazilian real and Singapore dollar. Anderson talks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Feb. 17 (Bloomberg) -- Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, talks about efforts to address fiscal problems in Spain and Portugal. Gurria also discusses imbalances in the food supply chain, global inflation threats, the U.S. deficit and the outlook for this week's Group of 20 finance ministers meeting. He speaks in Paris with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
Group of 20 finance chiefs remain divided over the next steps to narrow global economic imbalances as they squabble over how to reach a diagnosis.
French Finance Minister Christine Lagarde, who is hosting a meeting starting tomorrow in Paris of G-20 central bankers and her counterparts, said she’s hoping for an accord on which indicators should be used to analyze imbalances that economists blame in part for the financial crisis.
While there’s broad agreement to use the current account as a key measure, some countries are opposed, said a Canadian official who briefed reporters yesterday in Ottawa. Even if they reach consensus on a set of indicators, the ministers probably won’t agree on numerical targets for monitoring trade imbalances. A deal is unlikely this week on specific guidelines, a U.S. Treasury official told reporters in Washington Feb. 15.
“The G-20 is not about breakthroughs,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development told Bloomberg Television’s Francine Lacqua today. “The G-20 is about coordination and a gradual convergence. It’s about diagnosis, measuring comparing and then proposing public policies.”
As the crisis that forged the G-20’s role in 2009 fades, global leaders’ efforts to coordinate policies are increasingly stumbling over their differences. China will probably face renewed pressure to allow its currency to appreciate, a German aide said. One approach under discussion is to add the yuan to the International Monetary Fund’s special-drawing-rights basket, the Canadian official said.
Food Prices
Ministers may also express concern at commodity-price inflation that has sent global food prices soaring.
A meeting of G-20 leaders in South Korea in November was marked by clashes over whether Chinese or U.S. policies were more to blame for global trade imbalances. China has rejected policy prescriptions that fault its exchange-rate regime.
G-20 leaders agreed last year to find a set of “indicative guidelines” designed to identify large imbalances and seek actions needed to fix them.
“We have a China that saves and exports, a Europe that consumes and grows slowly and a U.S. that consumes and borrows,” Lagarde said in a speech today in Paris. “We have to consider whether we can carry on like that.”
Trade and current-account balances, as well as growth differentials and foreign-exchange reserve accumulation, are among indicators France has proposed for discussion to narrow imbalances, she has said.
‘Blindingly Obvious’
“They’ll do what is blindingly obvious” and agree to use current-account indicators, said John Kirton, a professor at the University of Toronto, who monitors the G-20.
Policy makers are trying to avoid a repeat of the last expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S. Treasury debt and depressed global yields. Lower borrowing costs helped stoke the U.S. housing and credit booms that later turned to bust.
China, the world’s largest exporter of goods, had a trade surplus of $183 billion in 2010. That represented a narrowing for a second year after a record $295 billion surplus in 2008, customs data show.
U.S. Treasury Secretary Timothy F. Geithner said in October that a ratio for current-account surpluses or deficits of 4 percent of gross domestic product could be seen as a benchmark for G-20 countries. China and Germany, the world’s two biggest exporters, rejected any move to set a target for current-account imbalances as a percentage of GDP.
Working Groups
The G-20 meeting will also set up working groups on capital flows and on commodity prices, the German official told reporters yesterday. The challenge is to find ways of avoiding excessive capital inflows into emerging nations such as Turkey without limiting the free flow of capital, the official said. One solution may be to strengthen bond markets in local currencies, the official said.
To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Rebecca Christie in Washington at rchristie4@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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