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G20 calls for Asia forex flexibility
Updated: 2004-11-22 09:43

The Group of 20 finance leaders of the major economies called Sunday called for US deficit cuts and greater foreign exchange flexibility in Asia, but were silent on the delicate issue of the weak dollar.

German Finance Minister Hans Eichel (L) says goodbye to China's Finance Minister Jin Renqing at the end of the G20 meeting of finance ministers and central bank governors at the Inter-Continental hotel in Berlin. [AFP]
Wrapping up a weekend meeting in Berlin, the G20 finance ministers and central bank governors said in a statement that they expected the economic environment to remain favourable next year.

But they said risks to growth had increased due to volatile oil prices, the US budget and current account deficits, and "geopolitical concerns" -- possibly referring to issues such as terrorism and instability in Iraq.

"We underscored the importance of medium-term fiscal consolidation in the United States, continued structural reforms to boost growth in Europe and Japan, and, in emerging Asia, steps towards greater exchange rate flexibility, supported by continued financial sector reform, as appropriate," the statement said.

It said the G20 expects oil prices to "moderate in the medium term".

Central bank intervention in the foreign exchange markets was not discussed, German Finance Minister Hans Eichel, whose country holds the presidency of the G20, said at a closing news conference.

The exclusion of the subject, never officially on the agenda, represented a victory for the United States, which had not wanted it discussed.

But it left Europeans empty-handed and still worried that the euro's record strength against the dollar will undermine a fragile, export-driven recovery in the eurozone.

Meanwhile, a Russian-US row over Moscow's objections to Iraqi debt relief from the Paris Club appeared resolved.

An unnamed US official said that Russia had agreed to the deal to wipe out tens of billions of dollars of Iraqi debt.

In Paris, officials said the so-called Paris Club of creditor nations had agreed to cut Iraq's debt by 80 percent. The Club was to make a formal announcement at a news conference in Paris scheduled for 5:30 pm (1630 GMT).

The G20, which groups the Group of Seven industrialized giants and the European Union with the leading emerging nations such as China, India and Brazil, agreed to promote sustained global growth.

In the so-called Accord for Sustained Growth, the officials emphasized the importance of price stability to foster investment and saving, and fiscal discipline to prevent strains on growth.

Competition -- "the driving force of economic growth" -- must be spurred and global trade barriers must come down, said the statement which was backed up by reform pledges.

The accord marks a significant leap for the emerging countries into a G7-style approach to globalization.

"The Group of 20 has proven its worth," German Finance Minister Hans Eichel said in a closing news conference. "What's more, we are a group producing results."

US Treasury Secretary John Snow said he was pleased to see a "broad endorsement of a stronger focus on the policies that lead to economic growth."

"This accord reflects broad agreement that the world economy is best served by open, competitive markets, free capital flows and free trade," Snow said in a statement.

In their final communique, the G20 finance chiefs also called for more international cooperation to combat the financing of terrorism and step up the fight against money laundering.

"International cooperation to combat the financing of terrorism and the fight against money laundering must continue and should be enhanced in order to protect and stabilise financial systems worldwide," it said.

Ministers said that recent terror attacks in Indonesia, Russia, Spain and other parts of the world have "confirmed that the fight against terrorism remains a global challenges".

The statement said G20 member countries agree that counter-strategies against the financial abuse should be developed on a long-run, systematic basis, and that they are committed to working closely on these issues with the Financial Action Task Force on Money Laundering.

Eichel said that China, which assumes the G20 presidency next year, will join the FATF "shortly" and it was hoped that India would join soon.

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