G-20 Close to Communiqué, Disagree on FX Rates

The Group of 20 economies are known to be near an agreement on a joint communiqué but remain divided over foreign exchange rates.

The G-20 summit opens Thursday in Seoul for a two-day run. The premier forum for the world economy began two years ago to fight the global financial crisis.

Thirty-three world leaders including 21 heads of G-20 member states, including European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso, will attend the summit. Agreeing in the previous four summits to the principles of pursuing strong, sustained and balanced growth through international cooperation, they will likely seek post-crisis revitalization for the world economy at the Seoul summit.

The biggest question is if they can find solutions to current account imbalances and friction over foreign exchange rates.

Korean President Lee Myung-bak will host a welcoming reception and a dinner at the National Museum of Korea at 6 p.m. Thursday before chairing the summit at the Seoul COEX. He will coordinate talks on narrowing differences on trade imbalances, foreign exchange rates and other matters.

At the three-day G-20 vice financial ministers meeting that ended Wednesday, a compromise was reportedly reached on more than 80 percent of the draft communiqué to be announced by the G-20 leaders. They agreed on the wording of most of the key agenda items, including reform of international financial organizations, financial regulations, a global financial safety net, and economic development.

G-20 countries, however, remain sharply divided over foreign exchange rates. A spokesman for the summit organizing committee told a news briefing that the debates over the foreign exchange rates were so heated that the conference room’s door had to be kept open.

Most of the wording in the communiqué on a sustainable and balanced growth framework remains empty, he added.

The vice finance ministers also failed to determine the ratio of the current account surplus to GDP of G-20 countries due to opposition from Germany, China, Brazil and other countries. Instead, the U.S.-proposed early warning system for current accounts is reportedly gaining increasing support.

A senior Korean official said, "It is highly likely that a market-determined exchange rate system that refrains from competitive currency devaluations and an early warning system will be included in the final communiqué."

yongari@donga.com lovesong@donga.com