Merkel sees 'tricky' G20 discussions

10th November 2010, Comments 0 comments

Germany's chancellor said on Wednesday she expected a "tricky" discussion at the upcoming G20 summit, as major powers disagree over currency policy and how to end exceptional stimulus measures.

Speaking before flying to Seoul for the meeting of the world's 20 top rich and emerging nations, Chancellor Angela Merkel called for leading powers to coordinate their so-called exit strategies and warned against creating new asset bubbles.

"There will of course be a discussion about exit strategies," Merkel told reporters.

"It is naturally desirable that the leading economic powers do not come up with too varied answers to the question as to when the exit strategy should begin," she added.

"This could be a thoroughly lively debate... all in all, a few tricky discussions, but an important summit," Merkel said.

Asked about the US Federal Reserve's policy of pumping 600 billion dollars into its fragile economy, Merkel said: "We are going to discuss this issue with the Americans in a spirit of partnership."

"Nobody has an interest in creating new bubbles. Rather, we must see to it that growth in the global economy this year is more sustainable and enduring that we had a few years ago," she said.

Critics argue that the Fed's "quantitative easing" stimulus amounts to an effective dollar devaluation, and has the potential to trigger a 1930s-style trade war if other countries respond in kind.

With this in mind, Merkel also pressed her fellow leaders to avoid any form of protectionism, amid criticism that certain countries, notably China and Japan, are keeping their currencies artificially low.

"The biggest danger for sustainable growth is currently coming from protectionism in its different forms," she said.

But she declined to criticise Beijing for its foreign exchange policy, saying: "I assume that China has a very strong interest in sending a positive signal from this summit.

"China also needs sustainable growth for its overall economic situation," added the chancellor.

© 2010 AFP

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