Pessimism rules at G20 Summit

Pessimism rules at G20 summit

A
strong sense of pessimism has shrouded the first day of the G20
summit of rich and emerging economies, with world leaders sharply
divided over currency and trade policies. The
US clashed with exporting giants China and Germany on Thursday
over a plan to rebalance skewed trade between deficit and surplus
countries.

The
summit, held in Seoul, South Korea's capital, has become the
centrepiece of international efforts to revive the global economy
and prevent future financial meltdowns.

Behind
the scenes, negotiators squabbled over the language in a closing
statement to be issued at the summit's conclusion on Friday, but
so far, officials cannot even agree on the agenda, much less a
draft statement.
Barack Obama, the US president, who is
working to salvage a deal at the summit after suffering an
economy-linked drubbing in US elections last week, said his
administration wanted to boost growth via "prudent"
economic policies.
"It is difficult to do that if we start
seeing the huge imbalances redevelop that helped to contribute to
the crisis that we just went through," he told a news
conference with the summit's host, Lee Myung-Bak, the South Korean
president.
"I don't think this is a controversial
proposition."

Currency
controversy

Several G20
members are upset after the US Federal Reserve's decision to
pump a further $600bn into the faltering US
economy, in a step that foreign critics say is likely
to trigger tit-for-tat currency devaluations.

Chinese
officials sought to throw the onus back on the US by arguing that
Beijing has an "unswerving" commitment to reform its
currency regime, but needs stability in the world economy to do
it. "If
you're sick yourself, don't ask others to take medicine," Yu
Jianhua, the commerce ministry spokesman, said, demanding the
debt-ridden US fix its own house first.

In
one-on-one talks with Obama, Hu Jintao, the Chinese president,
said: "I believe that with the concerted efforts of all the
parties, the summit in Seoul will produce positive outcomes."

David
Cameron, the UK prime minister, conceded that the G20 was not
in a "heroic phase" compared to its determined
response to the 2008 financial crisis, and that it needed to do "a
lot more work" on fixing economic imbalances.

Harried
negotiators have been meeting long into the night all week in
Seoul to try to pin down language that the G20 leaders can adopt
in the closing communique.

The
talks were likely to drag long into Thursday night, South Korean
officials said, after the G20 heads of government opened their
two-day summit with a working dinner of Korean beef and halibut.

"China
is being very difficult in finalising the texts, so there might be
brackets left for the leaders to fill in after all," a German
government source said on Thursday.

Final
statement: South
Korean and German officials said tha at best the G20 may settle
for a watered-down deal to task the International Monetary Fund
with crafting guidelines to trim the yawning imbalances between
creditor and debtor nations.

Ahead
of her own bilateral meeting with Obama, Angela Merkel, the German
chancellor, lashed out at a more detailed US plan to rectify
lopsided commerce by limiting the current account surpluses of big
exporters.

The
US wants the G20 to agree to curtail "excessive imbalances"
as a back-door way of forcing China to realign its currency, which
critics say it keeps deliberately cheap to support Chinese
exporters.

But
the proposal has run into trouble not just from China but from an
array of nations including Germany, another export champion that
insists its own trading prowess has nothing to do with any
currency chicanery. "To
set political limits on trade surpluses and deficits is neither
economically justified nor politically appropriate," Merkel
told a G20 business summit.

Emerging
economies around the world are worried that the billions in new
money from the Federal Reserve will stoke speculative flows
of foot-loose "hot money", and some are resorting to
capital controls in a bid to stem the tide.

There
is anxiety that G20 nations could be heading for a return to
1930s-style trade protectionism, with damning consequences for the
world economy two years after the start of the global financial
crisis. Naoto
Kan, the Japanese prime minister, said the risk was of
"competitive devaluation of currencies reminiscent of the
Great Depression"

See video:
http://english.aljazeera.net/news/asia-pacific/2010/11/201...