Next week, the G-20 summit will get under way in Toronto, but political posturing and grandstanding among the nations has already begun. In a letter to G-20 leaders published on the White House website, President Barack Obama says, "We must act together to strengthen the recovery" from the near collapse of the global economic system in the fall of 2008.
"A strong and sustainable global recovery needs to be built on balanced global demand," Obama writes. With "significant weakness" still among the G-20 nations, Obama adds that "to support the recovery and strengthen the ability of our financial systems to deliver needed credit, we must maintain the momentum of financial repair."
While he emphasizes the importance of stabilizing public debt, he also would like to G-20 nations boost demand and maintain their stimulus programs."I am committed to the restoration of fiscal sustainability in the United States and believe that all G-20 countries should put in place credible and growth-friendly plans to restore sustainable public finances," Obama writes. This may not sit well with some audiences domestically, especially after former Federal Reserve Chairman Alan Greenspan's warning about American debt.
China: Yuan Meddling Could Derail Summit
Obama actually tackles some prickly issues, including fiscal responsibility, financial regulations and transparency, head on. These will likely become some of the battlegrounds at the summit, but one of them is likely to stand out for its difficulty level -- China's currency policy. There is little doubt that his comment on currency matters -- "The signals that flexible exchange rates send are necessary to support a strong and balanced global economy" -- is a message directed at China.
China, though, has already warned that any kind of criticism on its currency policy could derail the summit, and suggested the international forum should concentrate on cooperation and coordination, not finger-pointing and criticism. China will not accept any external meddling in how it manages the yuan, an unnamed official said.
Previous G-20 summits have been criticized for not achieving specific agreements and quantifiable goals. But Canadian Finance Minister Jim Flaherty said Thursday the group hopes to announce an agreement on deficit reduction targets at the summit. He told the Associated Press the G-20 is making progress on hard targets on deficit and debt reduction, but did not say what those targets were.
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