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G20 finance ministers’ meeting – IMF reform

Published on October 28, 2010
Interview given by Christine Lagarde, Minister for the Economy, Industry and Employment, to the “Les Echos” newspaper

Paris, October 26, 2010


Q. – After the G20 finance ministers’ meeting, does the risk of a currency war seem to have been averted?

THE MINISTER – The collective resolve was indeed to avoid a currency war. The Ministers expressly discussed this issue. We pledged not to resort to competitive devaluation policies. But we also agreed to set broader goals for our current account balances without stigmatizing any particular country. Everyone, countries running surpluses like those running deficits, must be vigilant regarding changes in trading patterns. Admittedly, we haven’t yet brought in numerical targets which the American administration wants, since the G20 member countries aren’t all in the same situation. In particular, the countries heavily reliant on commodity exports pressed the point that the nature of their trade balance was different.

In the end, we agreed on a “path to peace”, but haven’t yet got the instruments at our disposal. This presages the work of next year’s French G20 presidency. It ties in with one of President Sarkozy’s goals, which is to work on building a new international monetary system.

Q. – Precisely, would you say that the G20 has laid the first stone of a new international monetary system?

THE MINISTER – Yes, because by turning our back on the “currency war”, we’re already paving the way to a new international monetary system based not only on currency policies but also monetary and macroeconomic policies.

Q. – Timothy Geithner was in favour of a sort of “trade stability pact” designed to impose a maximum current account deficit or surplus of 4% of GDP. Why wasn’t this idea adopted?

THE MINISTER – I’m in favour of reducing global trade imbalances, which aren’t good for our exporters. Today, the Euro Area is suffering the downside of a somewhat weakened dollar, the absence, in China, of a freely floating currency and the policies of countries with overheating economies like South Korea and Brazil. Anything designed to restore trade balances is important. The 4% goal put forward by our American partners was, admittedly, a bold initiative, but too uniform to be adopted as is. That said, the fact that we are pledging to put frames of reference in place for our current payments balances is a real step forward.

Q. – Do you think cooperation and concerted thinking in the G20 is as good as it was? What are you expecting from next month’s Seoul Heads of State Summit?

THE MINISTER – What struck me at this meeting is the absolute necessity of cooperation and dialogue. The French G20 presidency will follow this principle. Diktats, demands and arrogant behaviour are no longer acceptable in the G20. The respective positioning of the emerging countries and major role played by the Chinese economy are new realities we have to take on board. I would also highlight the European solidarity, particularly on the International Monetary fund reform. The fact that Europe has decided on a common position, that the Europeans supported each other’s proposals, was crucial in achieving a reform of the Fund in line with the objectives set by the heads of State at the September 2009 Pittsburgh summit


Q. – So you’re wholly satisfied with the agreement reforming the IMF governance?

THE MINISTER – Everyone contributed to making it satisfactory. The Pittsburgh summit’s goal was to transfer at least 5% of the voting rights to the dynamic under-represented emerging countries. With over 6%, we went beyond the heads of States’ commitment. The Americans and Europeans have given up a proportion of their rights. Germany, Britain and France keep their seats on the board. France’s influence within the institution is maintained.


Q. – The next finance ministers’ meeting will take place under French presidency at Bercy [French Ministry for the Economy, Industry and Employment]. What will be its priorities?

THE MINISTER – Bercy will indeed host that meeting. There’s no lack of subjects. We will have to follow up on the financial regulation implemented over the preceding months. We will pursue the debate on reforming the international monetary system, since a good number of task forces have already started working on it. With the participation of the World Bank, Financial Stability Council and International Energy Forum, we will get down to the job of reforming the commodities and related derivatives markets. Finally, world governance, development and innovative financing will also be on the table./.

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