France is hoping to win agreement on a list of indicators to identify and reduce trade imbalances when it hosts a meeting of finance ministers from the Group of 20 leading economies.
Christine Lagarde, French finance minister, told the Financial Times that “a combination of political posture and positioning” was making progress difficult just days ahead of the first such gathering of France’s G20 presidency
However, France was hoping to be able to win backing for a list that would identify imbalances concerning most countries and avoid singling out individual economies, said senior officials. These might include deficit and debt indicators, current account balances and credit growth alerts.
Ms Lagarde said she would “do her best” as chair of the G20 finance meeting to broker a deal at the meeting on February 18 and 19. “The pie has not been cooked. The consensus has to be reached between political leaders, not between technocrats or bureaucrats,” she said.
G20 leaders agreed at their summit in Seoul in November to draw up a list of indicators that would help place greater constraints on G20 members than existing assessments carried out by the International Monetary Fund.
It came after Washington was slapped down by China and Germany for proposing a cap on current account surpluses and deficits of 4 per cent of gross domestic product.
The finance ministers and central bankers will also debate France’s three priorities for its presidency of the G20: reform of the international monetary system, the need to address volatility of commodities prices, and reform of international governance.
On reform of the international monetary system, Ms Lagarde said the gathering would engage in a “lively debate”, including on what China’s role should be. She said France was in favour of including the renminbi in the currencies that make up special drawing rights – the IMF’s virtual basket of currencies. This could even be before the Chinese currency was fully convertible.
“Once convertibility is well-advanced, it [inclusion in the SDR] could be with a commitment towards full convertibility, over time,” she said. However, she refused to be drawn on the question of timing.
France was also looking with interest at suggestions for reform of the IMF’s international monetary and financial committee, to give G20 finance ministers direct authority over strategic decisions concerning the international monetary system. Ms Lagarde said that though “active proposals” were unlikely this weekend, it could be discussed.
France also wants ministers to debate a tax on financial transactions, which it believes could help fund G20 development and environmental aid commitments of $100bn a year from 2020. Ms Lagarde said France would be willing to push ahead with the tax without agreement from the US if there were enough support elsewhere.
“It would be extremely detrimental not to have the US on board,” she said. But, the plan was not dead without US backing, given public support for a tax. France hoped “that there will be a large enough coalition of the willing to take the initiative and take the lead”.