Brussels, 28/10/2010 (Agence Europe) - During the forthcoming summit of the G20 in Seoul, EU representatives will look at economic imbalances which are a common major concern for the G20. The EU calls for correcting measures to be taken, where appropriate, on the rates of change and capital flows to prevent a worsening of global imbalances.
This was stated in a letter from José Manuel Barroso, President of the European Commission, and Herman Van Rompuy, President of the European Council, forwarded to the EU heads of state or government who met at the European Council on Thursday 28 and Friday 29 October.
The letter underlines the advantages of EU mechanisms based on a limited number of indicators. Also, it states, the subject of exchange rates cannot be ignored and a strong and stable international financial system must be promoted. Furthermore, Barroso and Van Rompuy write that the G20 should reaffirm its commitment to move towards more market-oriented exchange rate systems that reflect underlying economic fundamentals and prevent competitive currency devaluation.
Before the meeting of G20 finance ministers last weekend, the United States had above all suggested reducing current account imbalances by bringing their balance, deficit or surplus, to below 4% of their GDP. According to the same letter, Jean-Claude Trichet, President of the European Central Bank (ECB) suggests that G20 heads of state or government should reaffirm during the Seoul summit that exchange rates must reflect economic fundamentals.
Furthermore, the European Council was expected, in its conclusions, to await with interest the confirmation by the G20 summit of decisions taken by the Basel Committee on strengthening the quality and quantity of banks' own funds by 21020. Europe will present its results on financial regulation (oversight package, regulation of hedge funds) and will call for initiatives to attenuate the volatility in the price of raw materials. (L.C./transl.jl)