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Tags: reserve | currency

Currency Debate Excluded From G8 Draft Documents

Wednesday, 08 July 2009 08:50 AM

G8 leaders have failed to get emerging powers to agree to climate change goals for 2050 and conclusions from their summit will not directly refer to a sensitive debate about the domination of the dollar.

Draft documents seen by Reuters on Wednesday ahead of the G8 summit and Thursday's meeting of the 17-nation Major Economies Forum showed the currency debate pushed by China being played down and hopes for a climate breakthrough had been overstated.

But officials in the Canadian delegation told CNBC it is too early to say whether the final communiqué will mention foreign exchange, and that the report on a lack of agreement on climate change is highly speculative.

Making no mention of Chinese and Russian interest in seeking a long-term alternative global reserve currency, a draft seen by Reuters talked only of global "imbalances" — which G8 diplomats had said might be the only oblique reference to currency.

"Stable and sustainable long-term growth will require a smooth unwinding of the existing imbalances in current accounts," it read.

China complains that dollar domination has exacerbated the global crisis and worries that the bill for U.S. recovery poses an inflation risk for China's dollar assets, an estimated 70 percent of its official currency reserves.


The Group of Eight meet in in L'Aquila, a mountain town that was wrecked by an earthquake in April — providing a fitting backdrop for discussions on the crumpled global economy that is struggling to overcome the worst recession in living memory.

It kicks off on Wednesday with the U.S., German, Japanese, French, British, Italian, Canadian and Russia leaders discussing the economic crisis.

The draft statement warned "significant risks remain to economic and financial stability." The G8 document cautioned that "exit strategies" from growth packages should only be unwound "once recovery is assured."

G8 leaders badly underestimated the economic problems facing them when they met in Japan last year and Wednesday's talks will touch on what nations must do to prevent another such meltdown.

However, officials said few major initiatives were expected to emerge, with the broader G20 forum, grouping rich industrial nations and major emerging economies, tasked with formulating a regulatory response to the crisis rather than the G8 nations.

The G20 met in London in April and convenes again in September in the United States.

"In reality (L'Aquila) is just an intermediary step," said a senior French official.


U.S. President Barack Obama was expected to make his mark on his first G8 summit by chairing talks of the MEF, whose members account for about 80 percent of global greenhouse gas emissions.

But talks among MEF ministers in Rome, called at the last minute on Tuesday to prepare for the summit, failed to close the gap between U.S. and Europe on the one hand and emerging powers like China and India on the other hand.

Berlusconi spoke of meeting Chinese "resistance" and the G8 appeared to have failed to persuade China and India to agree to a goal of halving world greenhouse gas emissions by 2050.

China's Hu Skips G8 to Deal with Xinjiang Riots

A draft prepared for the MEF meeting dropped any reference to this and aimed instead for agreement on the need to limit the average increase in global temperature to 2 degrees Celsius (3.6 degrees Fahrenheit) since pre-industrial times.

Developing nations, present in large numbers at the expanded G8 summit were more than 30 world leaders were invited including nine African nations, argue that they need to be able to consume more energy in order to end poverty among their populations.

Chinese President Hu Jintao pulled out at the last minute because of unrest in northwestern China in which 156 people have been killed. His departure may complicate climate change talks.

A packed first day is due to wrap up with talks on an array of international issues, including Iran's post-election violence and nuclear program. However, these are unlikely to lead to any immediate action, such as a tightening of sanctions.

One area where officials said a breakthrough might be possible was trade. A draft communique suggested the G8 and "G5" developing nations would agree to conclude the stalled Doha round of trade talks in 2010.

Launched in 2001 to help poor nations prosper through trade, the talks have stumbled on proposed tariff and subsidy cuts.

Leaders will also discuss a U.S. proposal that rich nations commit $15 billion over several years for agricultural development in poor countries to ensure food supplies.

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G8 leaders have failed to get emerging powers to agree to climate change goals for 2050 and conclusions from their summit will not directly refer to a sensitive debate about the domination of the dollar.Draft documents seen by Reuters on Wednesday ahead of the G8 summit and...
Wednesday, 08 July 2009 08:50 AM
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