The Group of 20 labored to agree how to put the world economy on a sounder footing as fears about Ireland’s ability to pay its debts underscored lingering fallout from the global financial crisis.
The G20 hoped to use a two-day summit to recapture unity forged in the depths of the crisis two years ago in order to soothe exchange rate tensions generated by imbalances between cash-rich exporting nations and debt-burdened importers.
But even as U.S. President Barack Obama voiced confidence leaders would find a formula for more balanced and sustainable growth, negotiators squabbled over the wording of a closing.
“The persistence of these imbalances is a problem in the long term and these things have to be addressed,” said Canadian Prime Minister Stephen Harper. “Will they be addressed at this conference? I’m not so sure, but I think we’re getting a more frank discussion on some of these matters, that they do have to be resolved.”
The meeting has been billed as a chance for rich nations to strike a grand bargain on how to rejuvenate the world economic order with emerging powerhouses like India and China.
But leaders appeared unlikely to venture far beyond agreements reached by their finance ministers last month.
“The real issue is, given that it is a problem, how do we coordinate policy? I don’t think you should be too demanding ... because such policy coordination has never been attempted before,” India’s chief G20 negotiator, Montek Singh Ahluwalia, told Reuters.
Sniping at the Fed
A major irritant in the run-up to the summit has been the Federal Reserve’s $600 billion bond-buying spree to revive the U.S. economy, which emerging markets fear will trigger a flood of money into their markets, boosting inflation and asset prices.
Former Fed Chairman Alan Greenspan stirred that pot, saying the U.S. central bank’s policy was deliberately weakening the dollar.
“The U.S. will never do that,” U.S. Treasury Secretary Timothy Geithner shot back in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”
Geithner again criticised China’s currency policies, saying the world’s second-largest economy risked stoking inflation pressures. China earlier reported that consumer price inflation had hit a 25-month high in October.
Yu Jianhua, an official with China’s Ministry of Commerce, said Beijing had no intention to confront the United States over currencies or trade issues.
But, Yu added, Washington “should not politicise the yuan issue, should not blame others for its domestic problems and should not force others to take medicine for its own disease.”
A source with Russia’s delegation weighed in, criticising “unilateral decisions” by some countries to weaken their exchange rates that could spark fears of global currency wars.
Obama, speaking after a meeting with South Korean President Lee Myung-bak, said he was confident leaders would support a programme for promoting balanced growth, building on a agreement reached at a G20 summit in Pittsburgh in 2009.
“I don’t think this is a controversial proposition,” he said.
The world has been spared an outbreak of protectionism since the crisis. But the cocktail of low growth and high unemployment is making it harder for politicians to muster support for opening their markets wider.
Despite the presence of Lee and Obama, South Korea and the United States failed on the sidelines of the summit to finalise a long-stalled stalled free trade deal.
Lee said a “little bit” of progress had been made since G20 finance ministers met in Gyeongju, South Korea, last month but deep divisions remained over how best to reduce imbalances.
A draft of the final communique showed the leaders would back the idea of “indicative guidelines” to narrow surpluses and deficits on the current account, the broadest measure of trade.
However, they were undecided on whether these would be based on indicators that are