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EU's Rehn says G20 must rebalance world growth
October 19, 2010 / 3:36 PM / 7 years ago

EU's Rehn says G20 must rebalance world growth

* Global imbalances emerge, U.S. running out of steam - Rehn

* Says G20 must coordinate policy to rebalance world economy

By Daniel Flynn

LUXEMBOURG, Oct 19 (Reuters) - The European Union’s monetary affairs chief called on G20 governments on Tuesday to take coordinated steps to rebalance world economic growth, ahead of their talks this week in South Korea.

EU Economic and Monetary Affairs Commissioner Olli Rehn said imbalances that destabilised the world economy before the 2008- 2009 financial crisis were emerging again, with exporting nations running excessive trade surpluses while others racked up unsustainable deficits.

Rehn said economic recovery in the United States, where jobless rates have remained stubbornly high and consumers cautious about spending, “appears to be running out of steam”. While unemployment had fallen in most of Europe, a rebound in the region’s economy was still “in progress”, he said.

“In the world economy...the pre-crisis imbalances are emerging, which threaten sustained recovery and job-creation,” Rehn told a news conference after talks between European finance ministers in Luxembourg.

“It’s essential that the G20...will be able to restore a sense of unity and especially pursue effective international policy coordination to rebalance global growth,” he said.

The Commissioner will travel to South Korea this week for Oct. 22-23 talks between G20 finance ministers expected to focus on reform of the IMF, new rules for international banking regulation and global currencies.

In recent weeks, the EU has closed ranks with Washington in accusing China -- set to become the world's second largest economy this year -- of keeping the yuan CNY= low to boost exports, undermining jobs and growth in Western economies.

ALL COUNTRIES MUST DO MORE

With the euro topping $1.40 in recent days, its highest level since January, European officials have increasingly expressed concern that the currency could act as a counterweight in a tug-of-war between the yuan and the dollar.

However, China’s central bank jolted markets on Tuesday with a surprise first rise in interest rates in nearly three years, upping benchmark rates by 25 basis points, reflecting its concern about rising asset prices and inflation. [ID:nSGE69I0HU]

Analysts said the move might suggest a deal between Washington and Beijing on easing exchange tensions after Treasury Secretary Timothy Geithner vowed the United States would not devalue the dollar for its own advantage. [ID:nTOE69I048]

Washington has also delayed a decision on whether to label China a currency manipulator until after a summit of G20 leaders in November in Seoul.

Rehn, who has repeatedly called for China to revalue the yuan more quickly, struck a measured tone on Tuesday.

“All countries should do their part to rebalance global growth. The surplus countries by reinforcing domestic demand and the deficit countries by prioritising...export growth,” he said.

The United States would like to see the G20 serve as a more open forum for discussion of global currencies -- an aim shared by France, which takes over the presidency of the group after the November heads of state and government meeting.

French Economy Minister Christine Lagarde said G20 issues were not discussed in depth on Tuesday.

European ministers, however, expressed satisfaction they clinched a hard-fought deal on hedge fund regulation ahead of the G20 talks this week, allowing them to present a united stance. [ID:nLDE69I1QN]

Additional reporting by Annika Breidthardt and Jan Strupczewski, editing by Rex Merrifield

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