US seeks to sustain shaky G20 unity

SEOUL - US Treasury Secretary Timothy Geithner insisted on Thursday that Washington would never resort to weakening the dollar to spur growth, seeking to cool tensions as G20 nations struggled to bridge chasms over currencies.

By (Reuters)

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Thu 11 Nov 2010, 12:30 PM

Last updated: Mon 6 Apr 2015, 11:24 AM

World leaders gathered in Seoul for a two-day summit hoping to move beyond broad promises of economic cooperation, but days of rancorous debate appear to have undone much of the G20 unity forged in the throes of a global crisis two years ago.

Adding fuel to an already heated debate over the US Federal Reserve’s bond-buying spree to revive the economy, former Fed Chairman Alan Greenspan said the United States was pursuing a policy of weakening the dollar.

“The US will never do that,” Geithner shot back a few hours later in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

The Group of 20 club of rich and emerging economies had hoped to use the summit to soothe tensions over foreign exchange rates that have been created by sharply divergent growth rates. US . President Barack Obama urged his peers to put aside differences and follow through on previous agreements to even out imbalances between cash-rich exporting nations and debt-burdened importers.

Obama, speaking after a meeting with South Korean President Lee Myung-bak, said he was confident leaders would support a program for promoting balanced growth, building on a agreement reached at a G20 summit in Pittsburgh in 2009.

“I don’t think this is a controversial proposition,” Obama said.

Thursday’s agenda included dozens of bilateral meetings, but kicks off with a working dinner Thursday night. The United States and South Korea failed to reach accord on a stalled free trade deal, an embarrassing blow to both countries.

Behind the scenes, negotiators squabbled over the language in a closing statement to be issued at the summit’s conclusion on Friday. The final version may not venture far beyond agreements reached by G20 finance ministers last month, yet it was still proving difficult to agree on the wording.

Conflict on the menu

Lee said a “little bit” of progress had been made since the October finance ministers’ meeting in Gyeongju, South Korea, but deep divisions remained over how best to reduce current account imbalances.

Leaders will discuss it at Thursday’s dinner, he said.

“We had reached an agreement (at Gyeongju) despite scepticism that no agreement would be reached because of a divide in opinion between US, China, Europe and other countries,” he said.

An idea floated by Geithner earlier for numerical targets to be set for for trade imbalances has now been taken off the table.

“This summit is a credibility test,” European Union Commission President Jose Manuel Barroso said. “The question is how far we can go at this summit to agree on joint action so we can boost global growth and jobs.”

A draft of the final communique obtained by Reuters showed the leaders would back the idea of “indicative guidelines” for the reduction of current account imbalances. However, they were undecided on whether these would be based on “measurable” indicators or more vaguely “quantitative and qualitative”.

The draft showed they would agree to “refrain from competitive devaluation” of currencies, but were debating whether to include the words “competitive under-valuation,” a reference to the US view on China’s currency policy.

China’s yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June. Washington has welcomed the slow-but-steady appreciation, although it has said more movement is needed.

Ireland’s deepening debt troubles posed another potential problem for the G20, which promoted this summit under the banner of “Shared Growth Beyond Crisis.” Ireland’s fragile government is battling to prove it does not need a Greek-style rescue to help it reduce the worst budget deficit in Europe.

Protests were set to intensify in the Korean capital on Thursday, although police set up a security corridor around the summit site and planned to keep disruptions far from the leaders. There have been hundreds of applications for rallies, mostly by small groups, with a mass rally scheduled for Thursday afternoon.

More news from