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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (16439)	11/21/2004 12:06:50 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 116555

G20 MEETING At-a-glance guide to the main points BERLIN (AFX) - Following is an at-a-glance guide to the main points from this weekend's meeting of G20 finance ministers and central bank governors. The G20 brings together the world's 20 biggest industrialised and emerging economies. FOREX -The G20 gave no signal of any readiness to halt the dollar's slide. -German Finance Minister Hans Eichel said the possibility of foreign exchange market intervention to support the dollar was not discussed at the meeting. -Asked whether there had been any talks on intervention, Eichel said: "The term you just used did not come up at all." -He said exchange rates were not officially on the agenda of the meeting, and ministers and central bankers touched on them only in the context of their discussions on global current account imbalances. -He said the G7 Boca Raton statement on exchange rates still applies. In this, G7 members described excess volatility and disorderly movements in exchange rates as undesirable for economic growth. -Japan's Vice Finance Minister Ryotaro Tanose reiterated that excessive moves in exchange rates are not desirable. -The communique issued at the end of the meeting made no reference to exchange rates, other than to repeat a call for steps towards greater exchange rate flexibility in emerging Asia. -People's Bank of China governor Zhou Xiaochuan said it is too soon to talk about moves to loosen the yuan/dollar peg. -The US says it did not feel pressured by other countries over the weakness of the dollar at meeting. "We didn't feel that we were put in the hot seat," a senior US official said. -However, Eichel said the G20 was concerned that imbalances could result in "sudden changes" in exchange rates which would not be welcome. -German Chancellor Gerhard Schroeder called on the European Central Bank and other central banks to intervene to halt the US dollar's "worrying" slide. -But there was no sign that the ECB is ready to intervene to stem the euro's appreciation. -Bank of Italy governor and ECB council member Antonio Fazio said the ECB has to focus on inflation rather than the level of the euro. "Our main objective according to the treaty is to deliver price stability and only once we have guaranteed price stability can we think about other objectives," he said. CURRENT ACCOUNT IMBALANCES -The G20 said a number of policies are important for the reduction of current account imbalances -- fiscal consolidation in the US, structural reforms in Europe and Japan and exchange rate flexibility in emerging Asia. -Eichel said the US twin budget and current account deficits in particular are a problem, and therefore welcomed US Treasury Secretary John Snow's statement that the US now has a programme to raise the US savings rate. -But Schroeder criticised the US government's lack of action to correct its current account deficit. -"One can hardly call on Europe to make structural reforms, which we are doing, and then not emphasise your own economic problems," he said. -Snow said the US is taking action. -"The United States needs to do its part by raising national saving and reducing its budget deficit, President Bush is committed to cutting the budget deficit in half over the next four years," he said. -But he said Europe also needs to make a contribution by eliminating structural barriers that stand in the way of better economic performance. ECONOMIC GROWTH -The G20 expects the global macro-economic environment to remain favourable in the next year, but said downside risks to growth have increased due to volatile oil prices, the US twin deficits and geopolitical concerns. -"We expect ongoing strong growth, (albeit) a little bit weaker next year than this year. That is above all due to the oil price," said Eichel. -Snow said the US and global economies are set to continue growing strongly. -Italy Finance Minister Domenico Siniscalco said that in the euro zone there is a problem with confidence levels and therefore with domestic demand, but the economy is still recovering in line with expectations. OIL PRICES -The G20 said it expects oil prices to moderate to between 35 and 40 usd per barrel in the medium term. -Oil-producing countries are expected to have little spare capacity until 2010, meaning prices will be sensitive to unexpected changes in demand and supply, it said. -It said oil price is still "well below its historical peak" in real terms, despite this year's price jump. -Saudi Arabia Finance Minister Ibrahim al-Assaf said the oil price rise is having a "very limited" impact on developed economies, but a more negative impact on developing countries. -"The influence on the highly developed countries is very limited, that is clear," al-Assaf said. "In developing countries there are negative effects." ECONOMIC REFORM AGENDA -The G20 published a "reform agenda" in which each economic region committed to specific policies. -The US expressed determination to reduce its public deficit, reform its health and pension systems and raise private savings. -EU countries committed to further reforms of labour markets and the reduction of budget deficits. -Japan said it will continue to reform its financial system, and China said it will promote the development of the private sector and reform state-owned enterprises. -The reform agenda is underpinned by a separate "accord for sustained growth" in which the G20 set out a number of policy principles in the fields of monetary and financial stability and competition. -It emphasised the need for price stability and fiscal discipline, and said deregulation, privatisation and the liberalisation of international trade are needed to strengthen competition. PARIS CLUB IRAQ DEBT CANCELLATION -It was announced at the G20 meeting that creditor countries had reached agreement on a deal to cancel 80 pct of Iraq's debt to Paris Club members. -The deal was initially agreed by the US, Germany, and France, with Russia's later approval clearing the way for it to proceed. -Eichel said the debt would be forgiven in three stages under the deal -- 30 pct immediately, a further 30 pct in a second stage, tied to an International Monetary Fund programme, and then 20 pct in a third stage, dependent on the success of the IMF programme. -Of Iraq's 120 bln usd of debt, 21 bln is owed to Paris Club governments. A further 60-75 bln is owed to other Middle East and Gulf governments. -The UK and US had been arguing that 95 pct of Iraq's debt should be forgiven, while Germany, France and Russia favoured writing off just 50 pct of the debt. CHINA MONETARY POLICY -People's Bank of China governor Zhou Xiaochuan said the PBoC will monitor the response of commercial banks to its recent interest rate increase to see if further policy changes are needed. -"We are going to observe how the commercial banks respond to the new policy and then we can see whether we need to go further to consider interest rate policy or not," Zhou told journalists. -"We just adjusted benchmark savings rates and lending rates and on the other hand we have agreed steps to liberalise interest rates, so I think the commercial banks can respond according to the market situation," he said. TAX COOPERATION -The G20 reached an agreement in principle to exchange tax information in order to counter international tax evasion. -It agreed to apply the OECD's code on the exchange of information between national tax authorities. TERRORIST FINANCING, MONEY LAUNDERING -The G20 called for more international cooperation to combat the financing of terrorism and step up the fight against money laundering. -"International cooperation to combat the financing of terrorism and the fight against money laundering must continue and should be enhanced in order to protect and stabilise financial systems worldwide," it said. -"Identifying and cutting off the various mechanisms of financing terrorism is an important contribution to interfere with the preparation of terrorist activities at an early stage." -G20 members should address illegal activities through "intensified monitoring and investigation" by authorities and should "apply appropriate sanctions" if necessary, a statement issued after the meeting said. -G20 members should freeze the financial assets of terrorists or criminal organisations and "pay special attention to a potential misuse of the non-profit sector", the statement said. newsdesk@afxnews.com