The U.S. won G-20 backing on Saturday to tackle groaning trade imbalances as the world's biggest industrial nations vowed to avoid tit-for-tat currency devaluations.
After all-night talks among their senior officials, G-20 finance ministers forged an agreement in South Korea to “refrain from competitive devaluation of currencies” and aim for “more market-determined exchange rate systems.''
South Korean Finance Minister Yoon Jeung-Hyun said the two-day G-20 meeting had laid to rest fears of a “currency war” between struggling debtors such as the U.S. and exporting powers such as China. The outcome will “terminate the controversial currency issue now,” he told a news conference, while conceding that it was “very difficult” for the G-20 to reach agreement.
In a statement, the finance ministers vowed to “pursue the full range of policies conducive to reducing excessive imbalances and maintaining current-account imbalances at sustainable levels.''
The International Monetary Fund won greater power to oversee G-20 commitments. It was tasked with compiling periodic reports that will investigate how a country's economic policies can damage trading partners.
Historic deal
IMF chief Dominique Strauss-Kahn said the G-20 ministers had, in parallel, struck a “very historic” deal to revamp the Washington-based financial watchdog to give China and other emerging powers a greater say.
Under the deal, which has been years in the making, Europe agreed to cede two seats on the IMF board to accommodate developing nations. Brazil, Russia, India and China will all in future rank among the top 10 IMF shareholders.
The G-20 also signed off on a deal for tighter regulation of banks and big finance firms blamed for triggering the global economic crisis, raising the amount of top-quality capital that banks must hold in reserve for a rainy day.
