PARIS (MNI) – The diversification among major reserve currencies
will have top priority under France’s presidency of the G20 starting in
November, the deputy director of the French Treasury said Monday.
There will also be an examination of “how the international
community can best protect countries facing a financial crisis,” Benoit
Coeure told Market News International on the sidelines of a colloquium
on the economic crisis.
French President Nicolas Sarkozy has repeatedly railed against the
preeminent role of the dollar in foreign exchange matters and the weak
level of the Chinese yuan.
However, France’s goal is not necessarily a greater role for the
euro, Coeure cautioned, reminding that the EU has a “neutral” stance on
this issue. “It’s the markets that decide the right diffusion of the
euro,” he noted.
France’s initiative will be to encourage a “reflection” on a
greater use of Special Drawing Rights issued by the IMF as an
alternative type of forex reserve and international payment, Coeure
said.
Concerning exchange rate stability or adjustments, Coeure noted
that a “mechanism of dialog” based on the practice of the G8 exists as
well in the G20. France will explore “how we can articulate this
dialog.”
The IMF will also be the focus of a new financial “insurance,”
system building upon the ongoing work on “global safety nets” under
Korea’s presidency of the G20, he added.
Coeure declined to offer more precise examples of the kind of
initiatives France would take, explaining that the government was
waiting to hear the propositions of the IMF and other countries. “I
can’t say more at this stage,” he said. “We’re still in the phase of
reflection.”
Speaking to the colloquium, Coeure cautioned against exaggerated
expectations for reforms in the forex realm: “The G20 is not Santa
Clause!”
On the same issue, other economists at the conference underscored
the inertia of China in adapting its currency regime to the demands of
the western powers. “I don’t see China prepared to take any close and
intense responsibility” corresponding to its growing weight in the world
economy, said Rolf Langhammer, vice president of Germany’s Kiel
Institute for economic research.
Daniel Cohen, director of the French economic think tank Cepremap,
agreed that China was more likely to take a passive role and let other
countries adapt to its dominant economic position, thus blocking any
global solution to the imbalances between deficit and surplus countries.
After a decade of jaw-boning on this issue, “I don’t see how to reach a
solution today,” he said.
In response, Coeure noted China had begun to shift away from
export-led growth at the expense of the trade-deficit partners toward
the development of domestic demand and a more environmentally friendly
economy, and he said it should be encouraged by the G20 to continue on
that path.
The Treasury official also underscored the need to pursue the
reform of financial regulation, with a focus on global governance: “The
rest of the world is waiting to see what Europe can do.” Among the
issues to explore will be the regulation of polluting emissions and
national governments’ ability to enforce regulations at their borders.
In light of uncertainties about the sustainability of the economic
recovery, the leading powers must also find the appropriate mix of
fiscal consolidation and growth-support measures, Coeure said.
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