WASHINGTON – Differences that threaten the outbreak of a currency war persisted after a weekend meeting of global finance ministers, who left without resolving what to do.
They did agree, however, that the 187-nation International Monetary Fund (IMF) was the organisation best suited to deal with rising global currency tensions that risk overshadowing next month’s summit meeting of the Group of 20 nations in South Korea.
The G-20 includes traditional economic powers such as the United States and Europe along with fast-growing economies such as China, Brazil and India.
Various nations are seeking to devalue their currencies as a way to increase exports and jobs during hard economic times. The concern is that such efforts could trigger a repeat of the trade wars that contributed to the Great Depression of the 1930s as country after country raises protectionist barriers to imported goods.
“Currency disputes can easily become trade disputes,” cautioned Canadian Finance Minister Jim Flaherty.
The IMF ended two days of talks on Saturday with a communique that pledged to “deepen its work” in the area of currency movements.
This included giving the head of the IMF, Dominique Strauss-Kahn, a mandate to operate as judge, arbiter and analyst in dealing with the main players in the currency dispute, the United States, the euro area, China and Japan.
The communique essentially papered over sharp differences on currency policies between China and the United States.French Finance Minister Christine Lagarde said that a successful resolution of the currency dispute with China would require a cooling of overheated rhetoric about currency wars. (AP)
