G20 Leaders Views on Economy, Budget Deficits, Bank Regulation, Yuan

June 28, 2010

World leaders agreed Sunday to take different paths for cutting budget deficits and making their banking systems safer, a reflection of the uneven and fragile economic recovery in many countries.

The following are highlights from quotes by leaders and other officials attending the meetings.

On G20 cooperation: “Our challenges are as diverse as our nations. But together we represent some 85 percent of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time.”

On China’s yuan: “The United States welcomes China’s decision to allow its currency to appreciate in response to market forces. We didn’t expect a 20-percent revaluation in a week. That would be disruptive to the Chinese economy. It would be disruptive to the world economy.

“We do expect that as more and more market forces come to bear, that given the enormous surpluses that China has accumulated, that the RMB is going to go up, and it is going to go up significantly.”

Zapatero was invited to participate in the talks, though Spain is not a G20 member. He reaffirmed Spain’s pledge to slash the country’s budget deficit to 3 percent of gross domestic product by 2013 from 11.2 percent in 2009. “We are going to bring this about with determination. We will not vacillate.”

On G20 target to halve deficits by 2013: “We are talking about halving the deficits is oversimplifying the problem because it differs from one country to another. I am more interested in the fact that countries do implement the right measures.”

On the Chinese currency: “China has already set out to allow some flexibility. Our finance minister has welcomed this and the United States has also made similar remarks. There was no discussion at this meeting that mainly focused on the yuan. I think it was because this issue has turned a corner.”

On bank tax: “The bank tax was in focus before the meeting, but it was not a major point of discussion at this meeting. In preparation for the meeting, European countries were interested in the idea, but Japan and the United States were not necessarily in favor of this form of tax. It was mentioned, but there was no deep discussion on the issue.”

On deficit and debt targets: “This is a very useful political signal that governments can take back home with them … because as you know it’s not uncommon that governments set these targets but then historically haven’t met them. This is the first time in the G20 you have a specific target for advanced economies.”

On the WTO’s Doha round of trade talks: “Where we are at the moment, we are stuck, we are not progressing. If we stay where we are, I don’t think we are going to make it … if we can find a new dynamic, we can find a way to get these talks going.”

When asked about a CIA report that says Iran is close to nuclear weapons: “As to this information — it needs to be checked. In any case, such information always is a concern because today the international community does not recognize the Iranian nuclear program as transparent. And that is why the (United Nations Security Council) resolution appeared. If it is shown that what the American special services say is true, then it will of course make the situation more tense, and I do not exclude that this question would have to be looked at additionally.”

On the International Monetary Fund: “Reform of the IMF is continuing, but it needs to be taken to the finish.”

On Kyrgyzstan: “I don’t really understand how a parliamentary republic would look and work in Kyrgyzstan. Will this not help those with extremist views to power? This concerns me. In its current state there are a host of scenarios for Kyrgyzstan, including the most unpleasant scenario — going up to the collapse of the state. To prevent such a scenario, it needs to have strong and well organized authorities.”

On bank tax proposal: “Europe must show the path for bank tax. We will show the path and we will do it. … It’s difficult to have everybody go in the same direction. At least it (the concept) has been accepted.”

On plan to halve deficits: “I do not think the word target word has been used … it would be less than the specific commitments that we made with our European partners, since these commitments we have made 3 percent (of GDP) in 2013 and percent in 2011. Some wanted it to be stronger, others wanted it to be less severe, we found that this compromise is pragmatic.”

“We are not for example going to ask Spain, Greece and Portugal to finance major support plans … the same way we will not ask China to massively reduce those costs is a commitment by each member, but this is not a statement of the G20. It’s voluntary by country each takes the commitment to conduct a sustainability plan, but not a collective order of the G20, for example, Japan does not adhere to this objective, which is its right.”

On China’s yuan rate move: “It is not a defiance of the G20, but a constant position of our Chinese friends.”

On China’s currency move: “We want to applaud a number of recent actions that are positive … first of all the budget of the United Kingdom, which strongly tackled the British deficit, Chinese flexibility on exchange rates, and the new U.S. law on financial sector reform.”

“The declaration has an important commitment to greater exchange rate flexibility going forward. And as we know, the Chinese specifically have made that commitment to the world coming into and at this summit. And I’m confident that the Chinese will fulfill that commitment. And as we all know, when you make commitments like this on the world stage you will be held accountable for them.”

On global economic recovery and exiting stimulus steps: “With the common efforts of G20 members and the international community, the world economy is gradually recovering, but the foundations of the recovery are still not solid, the process is not balanced and there are still many uncertainties.”

“All this shows that the deeper impacts of the financial crisis have still not been surmounted, and systemic and structural risks to the world economy remain very grave. We must act cautiously concerning the timing, pace and strength of exits from economic stimulus policies.”

On China’s goals: “Our top priority is to ensure strong growth. Our long-term objective is to enable sustainable growth. Balancing growth by adjusting our economic structure is an objective requirement.”

“Since the beginning of this year, we have worked to maintain the consistency and stability of our economic policies, while also stressing the need to make our policies more targeted and flexible according to evolving circumstances.”

“Since the start of the year, China’s trade surplus has continued to fall substantially. The trend towards a balanced current account has picked up speed. The momentum towards balanced economic development has increased.”

On G20 agreement to halve public sector deficits by 2013 and stabilize government debt: “This will be part of the final communiqué. “Frankly spoken, this is more than I expected. This is very ambitious. That all industrial countries have accepted this goal is a success.”

On dealing with systemic important financial institutions in trouble: “We have done important things here, how to solve this problem. We will decide in Seoul in autumn on a procedure for that issue.”

On omitting a yuan reference in the communiqué: “The majority of the members of the G20 welcomed the plans of the government of China on introducing a floating yuan rate. But in the final communiqué this phrase will not be in there at the request of the Chinese side.”

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