June 18 2010Obama urges G20 to boost demand
President Barack Obama on Friday urged other G20 countries to boost domestic demand and in-crease exchange rate flexibility to encourage global growth and rebalance the world economy.
In what appeared to be a warning aimed at China and Germany ahead of next weekend’s meeting of G20 heads of government in Toronto, the White House released a presidential letter saying: “I am concerned by weak private sector demand and continued heavy reliance on exports by some countries with already large external surpluses.”
The war of words between Washington and Beijing over China’s fixed exchange rate has escalated over the past two weeks, with the administration and Congress suggesting that patience with Beijing was running out. “I also want to underscore that market-determined exchange rates are essential to global economic vitality,” Mr Obama wrote.
He also reopened the debate over fiscal policy, which many had thought settled after the recent G20 finance ministers’ meeting.
“We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn,” he warned in language likely to be directed particularly at Germany.
Many investors had thought that China was likely to allow its renminbi to resume appreciating before the G20 meeting. But with the euro sliding against the dollar, Beijing has appeared reluctant to move.
fxnew.com
