The G20 summit meeting that began Thursday in Seoul had been expected to calm tempers riled by foreign exchange rates. Instead, Reuters reported that little substantive action was taken on the first day of meetings, as arguments over the U.S. decision to proceed with a second round of quantitative easing resulted in tension and debate.
Fears over a possible fresh financial crisis in Ireland that could spread to Spain and Portugal also cast a pall over the meeting. Although Jose Manuel Barroso, president of the European Commission, said that the EU had the tools to help Ireland, he did not commit to any action.
In another Reuters report, amid concerns of currency wars, Russia said the world economy remained “unstable and unbalanced,” and that it would be difficult for member nations to continue to work together as crisis pressures ease. Russia has not been as outspoken in its criticism of the U.S. as other nations.
Yu Jianhua, an official with China’s Ministry of Commerce, said that while China was not going to confront the U.S. over currency or trade, Washington "should not politicize the yuan issue, should not blame others for its domestic problems and should not force others to take medicine for its own disease."
The meeting had originally been expected to be “a chance for rich nations to strike a grand bargain on how to rejuvenate the world economic order with emerging powerhouses like India and China.” Instead it seemed likely that nothing beyond discussion would occur. U.S. Treasury Secretary Tim Geithner (left) had suggested numerical targets be set for trade imbalances, but that has been dismissed.
There was even dissent among negotiators as they struggled to find acceptable language for the closing statement that will be issued at the summit’s end on Friday. While a draft showed wording that said members would agree “to refrain from competitive devaluation" of currencies, there was debate over whether to use the term “competitive undervaluation," which refers to the way the U.S. regards China’s currency policy.