Canada urges joint action on recovery

Ottawa: Canadian Prime Minister Stephen Harper said a meeting of Group of 20 leaders in South Korea this week should focus on coordinated action to deal with an uneven global economic recovery and tensions in currency markets.

The risks to the global recovery have increased since the June summit in Toronto, Dimitri Soudas, a Harper spokesman, said at a briefing in Ottawa Friday where he read excerpts from a letter Harper sent to his G20 colleagues. Soudas also said that Canada wants more flexibility in world currencies and that China needs to meet a commitment made in June on that subject.

"The recent agreement by our finance ministers to move towards more market determined exchange rates that better reflect economic fundamentals, and to refrain from competitive devaluations, is of critical importance," Harper wrote in the letter, excerpts of which were given to reporters.

The G20 meeting in Seoul November 11-12 may struggle to make progress after German Finance Minister Wolfgang Schaeuble Friday said the US Federal Reserve's plan to buy another $600 billion (Dh2.2 trillion) of Treasuries was "clueless." Other unilateral measures to boost growth have raised concerns about what Brazil Finance Minister Guido Mantega dubbed a "currency war" as countries seek to ease trade and budget imbalances.

Global imbalance

"There is heightened volatility in foreign exchange markets and global imbalances are widening once again," Harper wrote in the letter. "We must continue to avoid the temptation of unilateral action in response to the current pressures now weighing on the global economy."

US Treasury Secretary Timothy F. Geithner has proposed targets to shrink current-account gaps to less than 4 per cent of gross domestic product. The US has cited a glut of Asian savings for helping spark the credit crisis earlier this decade, while Asian officials counter it's the Fed's liquidity injections that are warping global capital flows.

While the Fed is adding new stimulus, European Central Bank President Jean-Claude Trichet has signalled he intends to outline possible steps to withdraw aid next month as its economy recovers and some policymakers warn easy monetary policy risks triggering inflation.

The G20 nations must also implement the capital and liquidity rules set out in the Basel III agreement and new supervisory standards proposed by the Financial Stability Board, Harper said.