G20 compromise after US-China spat
12 Nov 10
Trade imbalances and currency pressure takes agreement right to the wire, as Europe rallies to calm Irish bond jitters
Leaders at the G20 economic summit in South Korea have clinched a last minute face saving compromise on the vexed subject of currency and trade, after “fractious” exchanges between China and the US threatened to derail the talks entirely. Europe, meanwhile, has been forced to fight a rearguard action, amid fresh concerns over a possible future bailout for Ireland.
The crux of the disagreement between Washington and Beijing was determining how to tackle distortions in currency and trade, which many feel are hampering recovery in the global economy. In particular, China’s soaring trade surplus and the low value of the Yuan are a thorn in the side of other economies and have led to fears of an exchange rate war.
In the final compromise, leaders of the G20 agreed to avoid such "competitive devaluation" of currencies and issued "indicative guidelines" to tackle trade imbalances.
Even as this agreement was taking shape, the UK, France, Germany, Italy and Spain were forced to issue a joint declaration addressing fresh concern on the bond markets over Ireland’s economic prospects and the possibility the republic would need to be bailed out.
"Any new [bail-out] mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements," said the declaration.