Official comments on global currency tensions
Financial leaders from the Group of 20 major economies meet in South Korea from Friday to try to take tackle global economic imbalances and currency tensions that are feeding worries of trade protectionism as the world economy struggles for a smooth recovery from the financial crisis:
Investors are turning away from low-growth rich nations to fast-growing emerging ones, prompting steps by some countries to control the wave of capital threatening to destabilize their economies. The following is a collection of official comments highlighting the concerns and strains:
TIMOTHY GEITHNER, U.S. TREASURY SECRETARY:
-- Letter to G20 finance and central bank chiefs, reported by Reuters on October 22
"G-20 countries should commit to undertake policies consistent with reducing external imbalances below a specified share of GDP over the next few years, recognizing that some exceptions may be required for countries that are structurally large exporters of raw materials.
This means that G-20 countries running persistent deficits should boost national savings by adopting credible medium-term fiscal targets consistent with sustainable debt levels and by strengthening export performance. Conversely, G-20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand.
G-20 countries should commit to refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing the appreciation of an undervalued currency. G-20 emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals.
G-20 advanced countries will work to ensure against excessive volatility and disorderly movement in exchange rates. Together these actions should reduce the risk of excessive volatility in capital flows for emerging economies that have flexible exchange rates.
YOSHIHIKO NODA, JAPANESE FINANCE MINISTER:
-- Press briefing, Oct 22:
Asked about the U.S. proposal to set targets for current account balances, Noda said: "We need to talk first, but numerical targets are unrealistic."
OLLI REHN, EUROPEAN UNION MONETARY AFFAIRS CHIEF:
"The main issue of this G20 meeting is certainly to agree on policy coordination to rebalance global growth, which could create or save millions of jobs."
"It is much better that we aim at rebalancing global growth through effective policy coordination than by taking unilateral action."
"Rebalancing global growth implies by definition that both surplus and deficit countries take action."
TIMOTHY GEITHNER, U.S. TREASURY SECRETARY:
-- Comments to business leaders, October 18: "It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive."
"It is not a viable, feasible strategy and we will not engage in it."
DMITRY PANKIN, RUSSIAN DEPUTY FINANCE MINISTER:
-- Comments to reporters, Oct 21:
"The United States will try to put the question of exchange rates and current account balances at the top of the agenda, to try to press China to make some commitments on this issue.
In my view it is unlikely that they will succeed.
Most likely, there will be some general words, along the lines of 'let's all live in peace'.
"Americans, by trying to press emerging markets in this way ... are trying to pass on their problems."
RAINER BRUEDERLE, GERMAN ECONOMY MINISTER:
-- Reuters interview, Oct 21: "Exchange rates must reflect economic fundamentals. That goes for all currencies, including the U.S. dollar and the yuan."
MERVYN KING, GOVERNOR BANK OF ENGLAND:
-- Speech, Oct 19: "The need to act in the collective interest has yet to be recognized, and, unless it is, it will be only a matter of time before one or more countries resort to trade protectionism as the only domestic instrument to support a necessary rebalancing."
"That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world. Every country would suffer ruinous consequences -- including our own."
GUIDO MANTEGA, BRAZIL FINANCE MINISTER:
-- Speaking to reporters in Brasilia on Oct 21 after his conversation with Geithner: "He guaranteed U.S. policy is not to weaken the dollar, on the contrary, it is to strengthen the dollar. He said the impact of the Fed policy was being overestimated.
"It is difficult, you weaken the dollar and want the Chinese to let the yuan appreciate."
-- Speech, Sept 27: "We're in the midst of an international currency war. This threatens us because it takes away our competitiveness."
CHINESE MINISTRY OF COMMERCE SPOKESMAN YAO JIAN:
-- Press briefing, Oct 15: "It is entirely wrong for the U.S. to make an issue of China's trade surplus and hence put pressure on the yuan exchange rate.
"Other countries have no right to comment on what is a reasonable level for a country's trade surplus.
[Source: Reuters, Factbox, 22Oct10]
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