Security was tight early on Saturday as representatives of the world’s 20 richest countries gathered in Paris for an annual summit of finance ministers and central bank governors.
Twenty finance heads are meeting to discuss ways to track dangerous imbalances in the global economy, in order to prevent another financial crisis.
The summit, which started at the French Finance Ministry on Friday, appears to be closing in on a list of five indicators, focusing on current accounts, real effective exchange rates and currency reserves, as well as public and private debt levels.
Germany’s finance minister was optimistic ahead of the meeting and had this to say.
Wolfgang Schaeuble, German Finance Minister said “If we can succeed to agree on processes to create more transparency, and so to fight the influence of speculation, then it would be an important step, and we have said that we will support the French presidency in this to the best of our abilities, because it is the right thing to do. We have seen from the financial markets that the exaggeration in markets who do not accept any rules themselves anymore, in the end this leads to self-destruction.”
While there is widespread agreement that smoothing out imbalances is key to getting the global economy back in track, how that should be done is more divisive.
The mere existence of the imbalances points to vastly different growth models among the world’s biggest economies, with each arguing that changing its strategy – whether based on exports, exchange rate controls, or the free flow of money – would hurt its recovery.
Finance ministers will meet several more times this year before France’s G-20 presidency culminates with a heads of state summit in Cannes in November.
China’s stand on imbalance indicator
For a Chinese perspective on the G20 meeting, we’re joined by Liu Baocheng from the University of International Business and Economics here in Beijing.
Q1: Host country France has been urging agreement on the imbalance indicators and put forward its own proposals. President Nicolas Sarkozy described the subject as “somewhat technical and indeed very political”. What did he mean by this?
Q2: Chinese Finance Minster Xie Xuren suggested the G20 should use trade figures rather than current account balances to assess economic distortions. What does this mean and what are his reasons?