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 The meeting of finance ministers and central bankers in Istanbul
comes at a difficult time, with major economies running at different
speeds, monetary policies diverging and Greece casting a new shadow
over Europe.
U.S. Treasury Secretary Jack Lew underlined the need to stick to
existing commitments on exchange rate policy, a Treasury official
said, pledges which include refraining from competitive exchange
rate devaluations.
"Secretary Lew strongly emphasized ... that we are highly focused on
ensuring that U.S. workers and firms play on a level playing field
and no country should use their exchange rate to increase exports,"
the official said.
The U.S. Federal Reserve looks set to raise interest rates this
year, a stark contrast to huge money printing programs by the
European Central Bank and Bank of Japan and impromptu rate cuts from
India to Australia, Canada to Denmark.
A by-product of that is the dollar being driven higher while other
major currencies tumble. There has generally been an acceptance in
Washington that a weaker euro and yen is an inevitable consequence
of actions to revive moribund economies, something the United States
has consistently called for.
According to a draft communique for the meeting, obtained by Reuters
overnight and intended for adoption later on Tuesday, the G20
welcomed the ECB's quantitative easing - despite German concern -
and said it would further support recovery in the euro area.
In a nod to expectations that the Fed will raise interest rates, the
draft said some advanced economies with stronger growth prospects
were moving closer to "policy normalization".
But it cautioned: "In an environment of divergent monetary policy
settings and rising financial market volatility, policy settings
should be carefully calibrated and clearly communicated to minimize
negative spillovers."
GREEK CONCERN
The draft welcomed the favorable outlook in some key economies but
gave a gloomy assessment of the global economy as a whole, saying
growth was uneven and trade slow.
It said G20 members would act decisively on monetary and fiscal
policy, if needed, to combat the risk of persistent stagnation,
although it said the sharp decline in oil prices would provide some
boost.
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"(There's a) school of thought which is kind of winning in this
world that the only way you can be credible and build greater
confidence is if you're honest about where things stand," said one
senior G20 official involved in the talks.
Germany, which boasts a record current account surplus, has been
unbending in the face of G20 calls to spend more and boost demand.
The draft communique also pledged to put debt as a share of output
on a sustainable path.
The G20 officials look set to reject a Turkish proposal to set
countries specific investment targets to spur a world economy which
looks increasingly reliant on the United States for growth.
The draft text made no specific mention of Greece, but its efforts
to strike a new debt agreement with the euro zone dominated the
agenda in bilateral meetings and other groupings on the sidelines,
officials said.
Canada's Finance Minister Joe Oliver said regulatory and financial
reforms had helped diminish the risk Greece may pose to the euro
zone, with Athens seeking a new debt arrangement and demanding a
reversal of austerity.
Asked about the Greek finance minister's description of the euro
zone as a house of cards that would collapse if Greece left, Oliver
said: "I would just say, he seems to be talking to his base.
"We certainly hope that Greece will stay in the currency union, but
that remains to be seen," he added.
(Additional reporting by David Dolan and Gernot Heller. Writing by
Nick Tattersall, editing by Mike Peacock)
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