–Adds Comments On France’s Longer-Term Objectives

PARIS (MNI) – The concrete objective for the upcoming summit of G20
finance ministers and central bankers in Paris will be limited to
defining the economic indicators for an analysis of global imbalances,
French Finance Minister Christine Lagarde said Monday.

This is the first stage of an ambitious program for the entire
French presidency of the G20, with the overriding goal of creating the
conditions for “solid, balanced and sustainable growth,” the minister
explained to foreign journalists here.

Among the indicators Lagarde mentioned in her presentation were
trade and current account balances, but also growth differentials and
the accumulation of foreign exchange reserves.

An accord on a basis of data would be the first step toward the
identifying the main imbalances in the global economy, with the
“ambitious” aim of correcting them over time, she said.

“We have a year” to make progress, Lagarde said, hinting that there
would be no dramatic announcements at the press conference Saturday
after two days of working sessions.

“It’s not we who want announcements, it’s you,” she told reporters,
adding that work on the indicators could continue in coming months if
there were no agreement by Saturday.

European Central Bank Governing Council member Christian Noyer, who
also took part in the press conference, stressed that the objective of
the discussion on imbalances was not “to point the finger” at a few
countries whose deficits or surpluses are spectacular, but rather to
analyze the weaknesses of each country.

This cooperative, non-confrontational approach was also underscored
repeatedly by Lagarde in outlining — with a certain “humility” — the
“very ambitious objectives” France has set out for this year’s G20.

The reform of the international monetary system will not aim to
restore fixed exchange rates or challenge the dominant role of the
dollar, she said, arguing that the U.S. should also be interested in
limiting the world’s trade balance and the excessive accumulation of
forex reserves.

Citing the Latin American countries faced with a rapid appreciation
of their currencies, the minister suggested that the response of capital
controls should be examined to see whether this was a legitimate remedy
or a protectionistic measure and that a “code of good conduct” might be
drawn up on this issue.

Efforts to reduce volatility on commodity markets will not include
administered prices but rather greater transparency and more information
on players and their positions in order to shed “some light” on this
market, she said.

Financial regulation will continue the course set out by previous
G20 guidelines in order to a establish a surveillance system “without
cracks” covering the shadow banking system as well, she said. “We
haven’t finished the work.”

Asked about demands that China revaluate its currency, Lagarde said
she had “no ready-to-use kitchen recipe.” She said the position on
extending the basket of currencies in the IMF’s special drawing rights
to include the yuan, on the gradual internationalization and
appreciation of the yuan and on the country’s dollar reserves was up
“only to the Chinese authorities to define in concertation and work with
the G20 partners.”

The allocation of SDRs by the IMF could also be a means of dealing
with periods of acute liquidity shortages, Noyer mentioned. Pooling
forex reserves of a region could create a “safety net” that would allow
individual countries to dispense with accumulation of such reserves to
protect their economies from the abrupt outflow of financial capital, he
ventured.

Concerning the financing of the E100 billion needed to combat
global warming, Lagarde conceded that France’s proposal for a tax on
financial transactions enjoyed “very relative support” within the G20.
She proposed several other sources of funding, including taxes on
international transport or CO2 emissions, as well as direct budget
contributions and private capital.

The governor of the Bank of France declined comment on the
succession to Bundesbank President Axel Weber, who announced his
imminent resignation last week. Noyer merely said he expected his
colleague to represent his central bank normally at the summit.

–Paris newsroom +331 4271 5540; stephen@marketnews.com

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