G-20 compromises on imbalances deal, vows vigilance on capital flows+

PARIS, Feb. 19 Kyodo -
The Group of 20 economies agreed Saturday to adopt a set of tools to measure
global economic imbalances as the first step toward crafting a policy mechanism
to fend off a future economic crisis, while pledging to strengthen vigilance
against potentially destabilizing capital flows and soaring commodity prices.
The accord on global imbalances, announced in a joint statement after the
two-day G-20 meeting of finance ministers and central bank governors, was
reached as a compromise, apparently in consideration of China, which had firmly
opposed some indicators being used as yardsticks to monitor economic
imbalances.
''We agreed on a set of indicators that will allow us to focus, through an
integrated two-step process, on those persistently large imbalances which
require policy actions,'' the statement said.
The indicators include public debt and fiscal deficits, and private savings
rate and private debt. ''The external imbalances composed of the trade balance
and net investment income flows and transfers, taking due consideration of
exchange rate, fiscal, monetary and other policies'' are also indicators.
China, a country with huge current and trade surpluses with the United States,
was seen as particularly reluctant to agree on current accounts and the real
effective foreign exchange rate as indicators to measure global imbalances.
Japanese Finance Minister Yoshihiko Noda stressed the agreement is not watered
down, saying current accounts, deemed as a leading yardstick to gauge economic
imbalances, are ''effectively included'' as the statement refers to the
breakdown of the current account
U.S. Treasury Secretary Timothy Geithner said in a statement, ''We are moving
gradually to build consensus on ways to assess measures and causes of external
imbalances.''
''This is the necessary foundation for effective international cooperation on
policy actions that can help pre-empt or diffuse such imbalances,'' he added.
The statement said that the G-20 economies will aim to agree on the so-called
indicative guidelines by their next meeting in April. As the second step, the
G-20 is supposed to discuss ways to conduct mutual assessment of member
economies in the latter half of 2011 as the G-20 agreed in the Seoul summit
last November.
On the world economy, the statement said, ''The global recovery is
strengthening but is still uneven and downside risks remain.''
The participants from the G-20 advanced and emerging economies noted that the
advanced economies see ''modest growth and persistent high unemployment,''
while emerging economies are experiencing ''more robust growth, some with signs
of overheating.''
They agreed on the need to improve transparency in commodity markets as part of
their efforts to prevent speculative bubbles in food and energy costs.
On the international monetary system, they agreed on the need for concerted
efforts to ''avoid disruptive fluctuations in capital flows, disorderly
movements in exchange rates...and persistent misalignment of exchange rates.''
The phrase on the exchange rate was modified from that adopted in the G-20
summit in Seoul, which said the advanced economies ''will be vigilant against
excessive volatility and disorderly movements in exchange rates.''
On the widespread unrest in the Middle East, the G-20 ministers and central
bankers said they ''stand ready to support Egypt and Tunisia, with responses at
the appropriate time well coordinated with the international institutions,''
the statement said.
They reaffirmed that they will pursue reform in the financial sector and
renewed their commitment to free trade and oppose protectionism.
In addition to Noda, Bank of Japan Governor Masaaki Shirakawa attended the G-20
meeting from Japan.
The G-20, representing about 85 percent of world output, groups Argentina,
Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey,
the United States and the European Union.
==Kyodo
2011-02-20 17:43:53


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