The G20 summit in South Korea has ended without achieving substantial progress. Meanwhile, EU leaders have moved to reassure investors about an Irish bailout.
However, the G20 leaders did agree to establish guidelines to address economic imbalances in the world. The issued will be revisilted in 2011 when France hosts the next G20 meeting.
The summit was dominated by a war of words between the US and China over their respective currencies. The Chinese are concerned by US efforts to drive down the value of the dollar by pushing more money into the financial markets. Last week saw the latest £600bn round of quantitative easing by the US Federal Reserve.
China fears such flows of capital will destabilise currencies. A spokesman for the People’s Bank of China said the Fed’s move had caused “strong concern”.
A People’s Bank of China spokesman said the Federal Reserve’s latest round of quantitative easing had caused ‘strong concern’.
But the United States believes that Beijing is trying to boost exports by keeping its yuan currency artificially low.
US President Barack Obama said: “China spends an enormous amount of money intervening in the market to keep it (the yuan) undervalued. And what we have said it it’s important for China in a gradual fashion to transition to a market-based system.”
But the United States struck a conciliatory note yesterday, however, with one official noting: “We’ve seen them (China) move to let the exchange rate appreciate in response to market forces at an accelerated rate since September.
“China recognises, of course, that’s very important to its own growth in future.”
G20: breakthrough or damp squib?
The US, the UK and others hope they got something at this G20 that will be the start of something essential to growth and good relations: the start of a journey by China to play more by the rules of the market when it comes to currency operations, to spend more when it’s in healthy surplus.
But China didn’t accept the criticisms and was aided in its own arguments because there was no centrally-agreed definition of excessive surpluses. So, the G20 agreed to get a kite-marked, collectively agreed product of analysis.
Read more from Gary Gibbon's blog, G20: a breakthrough or a damp squib? Discuss
Meanwhile, European Union leaders issued a statement at the G20 summit to reassure investors who are worried that Ireland’s fiscal problems are undermining the value of their bond holdings.
Germany‘s Chancellor Angela Merkel had stressed her determination that private investors would bear a heavier brunt for any Greece-style bailout to ease the Ireland deficit.
But a statement issued by the UK, France, Germany, Italy and Spain said: “Any new mechanism would only come into effect after mid-2013, with no impact whatsoever on the current arrangements.”
Yesterday the UK Prime Minister, David Cameron, predicted that the South Korea summit would produce agreements on reform of the International Monetary Fund, bank lending, and a free trade area for Africa.
And at a G20 press conference Mr Cameron stressed Birtain’s importance in the world. But as Channel 4 News Political Editor Gary Gibbon notes, the main host broadcaster failed to send a camera to the event.