Tags: US | Sustain | Shaky | Unity | G-20

US Seeks to Sustain Shaky Unity at G-20 Summit

Thursday, 11 Nov 2010 09:34 AM

 

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The United States sought to shore up support to tackle global economic problems as Group of 20 leaders met on Thursday, although the meeting of developed and emerging nations looked set to achieve little of substance.

U.S. President Barack Obama voiced confidence that the leaders would agree on steps for more balanced and sustainable global growth, but officials said the most likely outcome was a "lowest common denominator" deal on broad economic cooperation.

Struggling to recapture the unity forged in the throes of the global economic crisis two years ago, the Group of 20 club of rich and emerging economies had hoped to use the summit to soothe tensions over foreign exchange rates generated by imbalances between cash-rich exporting nations and debt-burdened importers.

However, behind the scenes, negotiators squabbled over the language in a closing statement to be issued at the summit's conclusion on Friday.

The final version may not venture far beyond agreements reached by G-20 finance ministers last month, yet it was still proving difficult to agree on the wording.

"The G-20 has prevented the boat from sinking, we have picked up speed but not all engines are working on full power, the G-20 must show that it is indeed the premier forum for global economic co-operation," European Commission President Jose Manuel Barroso said.

A major irritant in the run-up to the meeting was the U.S. Federal Reserve's $600 billion bond-buying spree to revive the economy.

Former Fed Chairman Alan Greenspan stirred that pot, saying the United States was pursuing a policy of weakening the dollar.

"The U.S. will never do that," U.S. Treasury Secretary Timothy Geithner shot back a few hours later in an interview with CNBC. "We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy."

Geithner again criticised China's currency policies saying the world's second largest economy risked stoking inflation pressures. China earlier reported that consumer price inflation had hit a 25-month high in October.

Nevertheless, Russia said it was "especially worried by attempts by a number of countries to take unilateral decisions to weaken their currencies" to stimulate growth.

"We believe that such steps lead to nervousness among market players and volatility of main currencies, prompting fears of global currency wars," a source with Russian delegation said.

Obama, speaking after a meeting with South Korean President Lee Myung-bak, said he was confident leaders would support a program for promoting balanced growth, building on a agreement reached at a G-20 summit in Pittsburgh in 2009.

"I don't think this is a controversial proposition," he said.

Thursday's agenda included dozens of bilateral meetings, but the summit officially kicks off with a working dinner Thursday night.

On the sidelines, the United States and South Korea failed to reach accord on a stalled free trade deal, an embarrassment to both countries' leaders.

CONFLICT ON THE MENU

Lee said a "little bit" of progress had been made since the October finance ministers' meeting in Gyeongju, South Korea, but deep divisions remained over how best to reduce current account imbalances.

A draft of the final communique obtained by Reuters showed the leaders would back the idea of "indicative guidelines" for the reduction of current account imbalances. However, they were undecided on whether these would be based on "measurable" indicators or more vaguely "quantitative and qualitative."

An idea floated by Geithner earlier for numerical targets to be set for for trade imbalances has now been taken off the table.

The draft showed G-20 members would agree to "refrain from competitive devaluation" of currencies, but were debating whether to include the words "competitive undervaluation," a reference to the U.S. view on China's currency policy.

An Indian official who declined to be named said the communique would settle on "lowest common denominator" language.

China's yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June. Washington has welcomed the slow-but-steady appreciation, although it has said more movement is needed.

Ireland's deepening debt troubles posed another potential problem for the G-20, which promoted this summit under the banner of "Shared Growth Beyond Crisis."

Ireland's fragile government is battling to prove it does not need a Greek-style rescue to help it reduce the worst budget deficit in Europe.

Protests grew in the Korean capital on Thursday, with thousands of anti-G-20 demonstrators marching from the main rail station, although police kept a security corridor around the summit site to prevent disruption.

© 2014 Thomson/Reuters. All rights reserved.

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