Brussels, 29/10/2010 (Agence Europe) - On Friday 29 October, European heads of state and government urged the large countries of the world to steer clear of a currency war during the forthcoming G20 summit in Seoul, in two weeks' time. “The recovery of the world economy will be at stake: global economic imbalances, the exchange rate”, said Herman Van Rompuy, the permanent president of the European Council (EUROPE is publishing Herman Van Rompuy's letter to the European Council with a view to the G20). He added that “these issues affect the prospects for growth and employment in the EU”.
The EU underlines it is necessary to refrain from any form of protectionism and to avoid making exchange rates fluctuate in order to obtain short term competitive advantages, the European Council states in its conclusions after its meeting in Brussels on Thursday 28 and Friday 29 October.
Global concern is growing over the atmosphere of an exchange war between the large powers to weaken their respective currencies so that they can export more and thus better confront the economic crisis. Europeans recently sounded the alarm regarding the high level of the euro, which could undermine the EU's timid recovery while penalising exports. They called on China to make a significant appreciation of its currency and have also expressed concern about the dollar's under-evaluation, while the United States is suspected of being very pleased at seeing its greenbacks drop in value as this stimulates US exports at a time when the country's growth is slipping.
“I believe a currency war is not called for”, said Luxembourg Prime Minister Jean-Claude Juncker. “We think exchange rates must not be characterised by excessive volatility and that they should reflect fundamental economic data”, he added.
Reciprocity. French President Nicolas Sarkozy, whose country is to hold G20 presidency “just after our Korean friends”, said: “We held a highly interesting discussion on the question of reciprocity in trade relations. A number of heads of state and government, a majority I believe, request that, in trade relations, Europe should show less naivety and agree to use the word reciprocity. I believe the message was heard by the Commission president and the European Council president”. The head of the Italian government, Silvio Berlusconi, also spoke of the importance of reciprocity in trade relations and was highly critical of the major problems caused by relocation.
IMF. Furthermore, “we are very pleased with the reform of the International Monetary Fund negotiated by the finance ministers on 23 October, as we have kept 24 members in the management board”, Sarkozy said. The agreement on reform of the IMF will “help deliver a more effective, credible and legitimate IMF and enable the IMF to play its role in supporting the operation of the international monetary and financial system”, EU leaders say in the conclusions of the European Council. They add that “quota as well as wider governance reforms should be delivered together as a single, comprehensive package and within the same time frame”.
European countries have made a “major effort in favour of emerging countries in order to strengthen global governance. We will again underline, to the leaders of emerging countries, that such new rights presuppose a new sense of duty and of shared responsibility”, Herman Van Rompuy concluded. (L.C./A.N./B.C./transl.jl)