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Thu, Jul 09, 2009 - Page 10 News List

G8 to sidestep debate on reserve currency

DRAFT DOCUMENTS: An EU official said major polluting nations have dropped their pledge to halve global greenhouse gas emissions by 2050

REUTERS AND AFP , L’AQUILA, ITALY

US President Barack Obama, left, and Italian Prime Minister Silvio Berlusconi greet one another yesterday on the first day of the G8 summit in L’Aquila, Italy.

PHOTO: AFP

G8 leaders have failed to get emerging powers to agree to climate change goals for 2050 and conclusions from their summit will not directly refer to a sensitive debate about the domination of the dollar.

Draft documents seen yesterday ahead of the G8 summit and today’s meeting of the 17-nation Major Economies Forum showed the currency debate pushed by China being played down and that hopes for a climate breakthrough had been overstated.

Making no mention of Chinese and Russian interest in seeking a long-term alternative global reserve currency, a draft seen by reporters talked only of global “imbalances” — which G8 diplomats had said might be the only oblique reference to currency.

“Stable and sustainable long-term growth will require a smooth unwinding of the existing imbalances in current accounts,” it read.

China complains that dollar domination has exacerbated the global crisis and worries that the bill for US recovery poses an inflation risk for China’s dollar assets, an estimated 70 percent of its official currency reserves.

The G8 meet in in L’Aquila kicked off yesterday with the US, German, Japanese, French, British, Italian, Canadian and Russia leaders discussing the economic crisis.

The draft statement warned “significant risks remain to economic and financial stability.”

The G8 document cautioned that “exit strategies” from growth packages should only be unwound “once recovery is assured.”

G8 leaders badly underestimated the economic problems facing them when they met in Japan last year and yesterday’s talks will touch on what nations must do to prevent another such meltdown.

However, officials said few major initiatives were expected to emerge, with the broader G20 forum, grouping rich industrial nations and major emerging economies, tasked with formulating a regulatory response to the crisis rather than the G8 nations.

The G20 met in London in April and convenes again in September in the US.

“In reality [L’Aquila] is just an intermediary step,” a senior French official said.

US President Barack Obama was expected to make his mark on his first G8 summit by chairing talks of the MEF, whose members account for about 80 percent of global greenhouse gas emissions.

But talks among MEF ministers in Rome, called at the last minute on Tuesday to prepare for the summit, failed to close the gap between US and Europe on the one hand and emerging powers like China and India on the other hand.

Italian Prime Minister Silvio Berlusconi spoke of meeting Chinese “resistance” and the G8 appeared to have failed to persuade China and India to agree to a goal of halving world greenhouse gas emissions by 2050.

“There is indeed a very strong commitment to identify the global goal for substantially reducing global emissions by 2050, but there is no 50 percent” mentioned in a draft declaration, an EU official said on condition of anonymity.

The first day of the L’Aquila summit was due to wrap up with talks on an array of international issues, including Iran’s post-election violence and nuclear program.

One area where officials said a breakthrough might be possible was trade. A draft communique suggested the G8 and “G5” developing nations would agree to conclude the stalled Doha round of trade talks in 2010. Leaders will also discuss a US proposal that rich nations commit US$15 billion over several years for agricultural development in poor countries to ensure food supplies.

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