Lagarde said that under the present situation the euro was taking the strain of a weaker dollar, the lack of a free-floating currency in China and overheated emerging economies like Brazil and South Korea.
"In turning our back on a currency war we have already established a diagnosis which opens the way to a new international monetary system based on exchange policies, but also on monetary and macroeconomic policies," she told Les Echos newspaper. Lagarde, who attended the G20 finance minister's meeting in the South Korean city of Gyeongju at the weekend, said a proposal by US Treasury Secretary Timothy Geithner for a 4 percent limit on trade imbalances had moved the debate forward.
"The target of 4 percent put forward by our American partners was certainly an audacious step, but was too uniform to be adopted as it stands," Lagarde said, noting allowances must be made for different economies, such as major commodity exporters.
"Having said that, the fact that we agreed to put in place guidelines for adjusting our balance of payments was real progress," she added.
The final G20 communique committed to refraining from competitive devaluations and also to "maintaining current account imbalances at sustainable levels" and said that indicative guidelines would be agreed, without saying when.
France will take over the G20 presidency in November after a heads of state and government summit in the South Korean capital Seoul.
Lagarde said the next G20 finance ministers' meeting to be hosted in Paris in February would discuss reforms of the international monetary system, with working groups already looking at this, as well as reform of commodities and derivatives markets.
"I favour rebalancing of global trade imbalances, which are hurting our exporters. At present the euro zone is acting as a counterweight to a rather weak dollar, to the absence of a floating currency in China and the policies of overheated emerging countries like Korea and Brazil," she said. (Reuters)
