The world’s leading countries should agree a new currency pact to help rebalance the global economy, a leading association of financial institutions has urged.
The Institute of International Finance, which represents more than 420 of the world’s leading banks and finance houses, warned on Monday that a lack of such co-ordinated rebalancing could lead to more protectionism. Charles Dallara, IIF managing director, said: “A core group of the world’s leading economies need to come together and hammer out an understanding.”
Mr Dallara, who as a US official worked on the 1985 Plaza Accord which co-ordinated international action to strengthen the yen against the dollar, called for a more sophisticated updated version of such an agreement. This should include stronger commitments to medium-term fiscal stringency in the US and structural reform in Europe. “Exchange rate understandings are of little use on their own,” he said.
And then we have this from Europe:
European policy makers on Tuesday ramped up pressure on China to allow its currency to strengthen, claiming the yuan's weakness threatens Europe's economic recovery.
Their direct language followed their meeting with Chinese Premier Minister Wen Jiabao as part of the Asia-Europe summit here and marked growing support from Europe for U.S. efforts to offset China's export advantage from the weak yuan, also known as the renminbi.
Jean-Claude Trichet, president of the European Central Bank, departed from ECB practice of not identifying countries for criticism. "We noted that the evolution in terms of the effective exchange rate, also vis-a-vis the euro, was not exactly what we would have hoped ourselves," Mr. Trichet said at a news conference. "This exchange-rate flexibility is very, very much in the interests of China."