G20 draft omits G7 reference to economic policy aims

MOSCOW Sat Feb 16, 2013 12:01am IST

Related Topics

MOSCOW (Reuters) - A draft communique prepared for Group of 20 finance leaders omits part of this week's Group of Seven statement declaring fiscal and monetary policy may only be used for domestic economic aims, a G20 delegate said on Friday.

It will merely stick to previous G20 language on the need to avoid excessive foreign exchange volatility and steer clear competitive devaluations.

The G20 leading economies intend to reaffirm their commitments to draw up credible medium-term fiscal plans but will also make allowances for the short-term economic situation facing some countries, the delegate said after negotiations.

"Everyone's bought into that," the delegate said.

The new emphasis on near-term considerations deferred to the United States and some others whose recoveries are still struggling.

The key paragraphs of the draft hammered out after several hours of talks make no direct mention of fiscal targets, in response to U.S. pressure, nor do they repeat the G7's language pledging not to target certain foreign exchange rates.

The currency market was thrown into turmoil after the G7 - the United States, Japan, Germany, Britain, France, Canada and Italy - issued a joint statement on Tuesday stating that domestic policies must not be used to target currencies.

Tokyo said that reflected agreement that its aggressive monetary and fiscal policies were appropriate but the show of unity was shattered by off-the-record briefings critical of Japan.

Tokyo was not singled out in the negotiations. "There wasn't anybody putting Japan on the spot. That's quite frankly a bit of a surprise," the delegate said.

In terms of reining in fiscal deficits, some took the view that the consolidation so far had been too aggressive, whereas Germans, European Commission and European Central Bank saw the slow fiscal progress as creating uncertainty.

"There's a concern in the G20, and it's not just the Americans, that if you end up with a target...which implies a very significant (fiscal) consolidation over a very long period of time, then you are signaling to the world that you are going to be imposing a fiscal drag," the delegate said.

"That's not the right message to convey when we're still concerned about growth in the near term.

"The Germans have the opposite view, which is the more credible you are, the more ambitious you are, over the medium term, the more people feel good about themselves now and the more they spend."

There was a big fight over whether to include the word "targets" in the section on fiscal plans, and in the end the Americans won, with the word excluded.

(Editing by Mike Peacock and Douglas Busvine)

FILED UNDER:
  • Most Popular
  • Most Shared

DEFENCE

REUTERS SHOWCASE

Canonisation

Canonisation

Pope declares sainthood of two Indians, four Italians.  Full Article 

Stake Sale Strike

Stake Sale Strike

Coal India trade unions call off strike in victory for Modi.  Full Article 

Arms Purchase

Arms Purchase

India approves $2.6 bln mounted gun purchase - official.  Full Article 

Interview with Bulgari CEO

Interview: Bulgari CEO

Bulgari CEO: we shouldn’t have left India so we’re back  Full Article 

Formula One

Formula One

Hamilton takes second F1 title in style.  Full Article 

Available For Remake

Available For Remake

Bollywood finally wants to pay the price for remakes  Full Article 

Davis Cup

Davis Cup

Vintage Federer seals first Davis Cup for Switzerland.  Full Article 

Movie Review

Movie Review

"Happy Ending" is old wine in an older bottle  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage