MOSCOW Feb 15 The European Union will urge the
United States and Japan on Friday to consolidate public finances
over the medium term to remove what it believes is one of the
main risks to the global economy now.
If Washington and Tokyo were to heed the call, it would also
help solve the issue of "currency wars" -- the weakening of the
U.S. dollar and the Japanese yen as a result of monetary and, in
the case of Japan, also fiscal stimulus, because tighter fiscal
policy would make the currencies stronger.
Finance ministers and central bank chiefs of the world's 20
biggest economies (G20) meet in Moscow on Friday and Saturday
and a rebalancing of the world economy is high on the agenda.
Policies of central banks in most of the leading developed
economies to pump money into their banking systems have raised
the prospect of "competitive devaluations" as each country tries
to boost its exports by engineering a weaker currency.
"Main downside risks to the global economy include the lack
of credible medium-term fiscal consolidation plans in the US and
Japan," a terms-of-reference document for European Union
delegations to the G20 talks said.
Other risks included the economic slowdown in emerging
market economies, the euro area sovereign debt crisis and
geopolitical tensions in the Middle East and North Africa which
could lead to further volatility in oil prices.
"The EU encourages the U.S. to continue its efforts to
tackle entitlement reform and find new ways to increase
government revenues whilst dealing with the debt ceiling and the
sequestration," the document said.
"The EU also encourages Japan to adhere to its G20
commitment to medium term fiscal consolidation," it said.
The document also stressed the importance of countries with
current account surpluses moving towards a more flexible
exchange rate and refrain from competitive devaluation of
While the first part sentence could refer to China, which
manages the exchange rate of its renminbi currency, the second
could point also to Japan, which last year had a $50 billion
current account surplus, even if it was less than half than a