King calls for G20 ‘metamorphosis’
January 19 2010
The Group of 20 should develop voting procedures and “metamorphose” to become the governing body of the International Monetary Fund to enhance its legitimacy and promote balanced world growth, Mervyn King, governor of the Bank of England, said on Tuesday night.
Setting out his concerns that the global economic recovery has started to widen trade imbalances, Mr King warned that protectionist forces would rise unless countries tackled unbalanced growth and misaligned real exchange rates.
“There is a risk that countries will, out of frustration, impose unilateral and ultimately self-defeating protectionist responses,” he said.
He praised the G20 as a body that represented 90 per cent of global output but said its reputation would soon be damaged if the body did not go further than simply talking to each other. “Smiling family photographs marking the attendance at international gatherings are no substitute for specific actions.”
His main message was that surplus countries – China, other Asian nations, Japan, Germany and oil exporters – “must expand domestic demand and allow their trade surpluses to shrink”.
Although Mr King stressed this was easier said than done, he warned that low-savings countries – such as the US and UK – would no longer be able to play the role of consumer of last resort. “It will require changes in prices and most obviously in real exchange rates,” the governor said.
To enhance agreements reached at the G20 to reduce imbalances, he suggested its “legitimacy and leadership ... would be enhanced if it were seen as representing views of other countries, too”.
“That could be achieved if the G20 were to metamorphose into a governing council for the IMF, and at the same time acquire a procedure for voting on decisions,” Mr King said.
But in a sign that the fights over the legitimacy of the G20 were still only at an early stage, Jean-Claude Juncker, who heads the eurogroup of eurozone finance ministers, said it was unsatisfactory that the only eurozone representative at G20 events was Jean-Claude Trichet, the European Central Bank president.
The European Commission is expected to propose soon that a political representative of the 16-nation eurozone should attend meetings of the G20, partly to strengthen Europe’s voice in exchange rate discussions.
Mr Juncker’s remarks underlined the determination of policymakers to boost the eurozone’s international profile and strengthen its internal cohesion under the provisions of the European Union’s Lisbon treaty, which came into effect in December.
“The eurogroup has to become a member of the G20 because the currency isn’t at the moment represented by its political president, if I may say so, but only by its monetary policy arm, which is Mr Trichet,” Mr Juncker told reporters. “This creates an imbalance in the representation of the eurozone.”
Europeans are already present in large numbers at G20 summits. France, Germany, Italy and the UK are permanent G20 members, Spain has attended recent events and the EU is represented separately by the Commission and the ECB. This has led to criticism from some non-Europeans that Europe has too many seats at the table.
The same point crops up in discussions of the relative weights of countries in the the IMF.
Olli Rehn, the Finn who has been nominated as the EU’s next economic and monetary affairs commissioner, said last week that he intended to draft proposals for boosting the eurozone’s representation at the G20 and other international economic forums.
“Currently we punch below our weight. By standing united, we can lead, not only follow,” Mr Rehn told his confirmation hearing at the European parliament.
Mr Juncker made clear that one factor purpose driving the quest for G20 representation was the view of some EU leaders, such as Nicolas Sarkozy, the French president, that the eurozone was suffering from global currency misalignments.
“The relationship between the major currencies isn’t adequately regulated from a eurozone point of view,” Mr Juncker said, in an implicit echo of Mr Sarkozy’s criticism of the US authorities this month for letting the dollar depreciate against the euro.
Mr Juncker said the goal of eurozone governments was an exchange rate policy “more focused on the representation of European interests”.
Mr Juncker, who was reappointed on Monday as the eurogroup’s leader for a two-and-a-half 2½-year term, indicated that he was not proposing to substitute himself at G20 events for representatives of individual eurozone countries.
Europeans are already present in large numbers at G20 summits. France, Germany, Italy and the UK are permanent G20 members, Spain has attended recent G20 events and the EU is represented separately by the Commission and the ECB.
This has led to criticism from some non-Europeans that Europe has too many seats at the table.
January 19 2010
The Group of 20 should develop voting procedures and “metamorphose” to become the governing body of the International Monetary Fund to enhance its legitimacy and promote balanced world growth, Mervyn King, governor of the Bank of England, said on Tuesday night.
Setting out his concerns that the global economic recovery has started to widen trade imbalances, Mr King warned that protectionist forces would rise unless countries tackled unbalanced growth and misaligned real exchange rates.
“There is a risk that countries will, out of frustration, impose unilateral and ultimately self-defeating protectionist responses,” he said.
He praised the G20 as a body that represented 90 per cent of global output but said its reputation would soon be damaged if the body did not go further than simply talking to each other. “Smiling family photographs marking the attendance at international gatherings are no substitute for specific actions.”
His main message was that surplus countries – China, other Asian nations, Japan, Germany and oil exporters – “must expand domestic demand and allow their trade surpluses to shrink”.
Although Mr King stressed this was easier said than done, he warned that low-savings countries – such as the US and UK – would no longer be able to play the role of consumer of last resort. “It will require changes in prices and most obviously in real exchange rates,” the governor said.
To enhance agreements reached at the G20 to reduce imbalances, he suggested its “legitimacy and leadership ... would be enhanced if it were seen as representing views of other countries, too”.
“That could be achieved if the G20 were to metamorphose into a governing council for the IMF, and at the same time acquire a procedure for voting on decisions,” Mr King said.
But in a sign that the fights over the legitimacy of the G20 were still only at an early stage, Jean-Claude Juncker, who heads the eurogroup of eurozone finance ministers, said it was unsatisfactory that the only eurozone representative at G20 events was Jean-Claude Trichet, the European Central Bank president.
The European Commission is expected to propose soon that a political representative of the 16-nation eurozone should attend meetings of the G20, partly to strengthen Europe’s voice in exchange rate discussions.
Mr Juncker’s remarks underlined the determination of policymakers to boost the eurozone’s international profile and strengthen its internal cohesion under the provisions of the European Union’s Lisbon treaty, which came into effect in December.
“The eurogroup has to become a member of the G20 because the currency isn’t at the moment represented by its political president, if I may say so, but only by its monetary policy arm, which is Mr Trichet,” Mr Juncker told reporters. “This creates an imbalance in the representation of the eurozone.”
Europeans are already present in large numbers at G20 summits. France, Germany, Italy and the UK are permanent G20 members, Spain has attended recent events and the EU is represented separately by the Commission and the ECB. This has led to criticism from some non-Europeans that Europe has too many seats at the table.
The same point crops up in discussions of the relative weights of countries in the the IMF.
Olli Rehn, the Finn who has been nominated as the EU’s next economic and monetary affairs commissioner, said last week that he intended to draft proposals for boosting the eurozone’s representation at the G20 and other international economic forums.
“Currently we punch below our weight. By standing united, we can lead, not only follow,” Mr Rehn told his confirmation hearing at the European parliament.
Mr Juncker made clear that one factor purpose driving the quest for G20 representation was the view of some EU leaders, such as Nicolas Sarkozy, the French president, that the eurozone was suffering from global currency misalignments.
“The relationship between the major currencies isn’t adequately regulated from a eurozone point of view,” Mr Juncker said, in an implicit echo of Mr Sarkozy’s criticism of the US authorities this month for letting the dollar depreciate against the euro.
Mr Juncker said the goal of eurozone governments was an exchange rate policy “more focused on the representation of European interests”.
Mr Juncker, who was reappointed on Monday as the eurogroup’s leader for a two-and-a-half 2½-year term, indicated that he was not proposing to substitute himself at G20 events for representatives of individual eurozone countries.
Europeans are already present in large numbers at G20 summits. France, Germany, Italy and the UK are permanent G20 members, Spain has attended recent G20 events and the EU is represented separately by the Commission and the ECB.
This has led to criticism from some non-Europeans that Europe has too many seats at the table.
AFP
