FRANKFURT The world's top economies should recommit to maintaining open markets and cross-border trade, the head of Germany's Bundesbank said on Wednesday, challenging the new U.S. administration's more protectionist stance on the eve of a key meeting.
Finance chiefs of G20 nations, meeting in the German town of Baden-Baden on Friday and Saturday, should also push ahead with new banking rules as deregulation, advocated by the new U.S. administration, could easily sow the seeds of a fresh economic crisis, risking serious harm to prosperity, Jens Weidmann told a conference.
Seeking to put 'America first', U.S. President Donald Trump's administration has advocated increased trade barriers and measures to protect U.S. business interest, challenging a G20 consensus to keeping markets open, upholding cross border trade and resisting protectionism.
"It's now all the more important that these achievements are not given up," Weidmann, who also sits on the European Central Bank's Governing Council said.
"Open markets and a competitive economic system are the pillars on which the prosperity of our economies rests," Weidmann said. "Free trade and competition result in a quantifiable increase in prosperity, particularly for those who have to consider their spending carefully."
While Trump has chastised free trade, already pulling out of a key trade deal and proposing a border tax on imports, any attempt to dilute a G20 commitment to free trade will likely face resistance, putting the onus on host nation Germany to seek a compromise.
Weidmann also warned the U.S. against easier bank regulation, arguing only for fine tuning.
"Carrying out deregulation in the hope of stimulating the economy could backfire," Weidmann said. "Insufficiently regulated financial markets can do significant harm to economic prosperity if a crisis occurs, as the latest financial crisis has painfully demonstrated."
(Reporting by Balazs Koranyi and Francesco Canepa, editing by Louise Heavens)