October 27, 2010 / 4:29 PM / 9 years ago

French G20 to seek reform of global monetary system

PARIS (Reuters) - France will seek reform of the global monetary system during its upcoming G20 presidency to protect emerging economies and to diversify international reserves, Economy Minister Christine Lagarde said on Wednesday.

France, which takes over the chair of the G20 group of leading economies in mid-November, has placed reform of the international monetary system at the top of its agenda for its year-long presidency.

G20 finance ministers at a meeting in South Korea last weekend reached a landmark agreement to reform IMF voting rights, handing more power to underrepresented emerging economies, and also reached a commitment from members to refrain from competitive currency devaluations.

Presenting the results of the meeting to France’s National Assembly, Lagarde said it went some way towards the objectives of France’s G20 presidency laid out by President Nicolas Sarkozy, but more needed to be done.

“Very clearly the international monetary system should be modified, improved and re-established to protect emerging countries and to diversify reserves,” she said.

Sarkozy, whose poll ratings are mired at near record lows, has said that under France’s stewardship the G20 will target an ambitious agenda, including combating volatility in commodities markets and improving global economic governance.

In preparation for its presidency, France has been canvassing the opinion of G20 partners in recent months on reform of the international monetary system, officials say.

One official said a key area of discussion was how to encourage greater use of China’s yuan as a reserve currency in the future, including talks on a possible timetable for its inclusion in the basket of currencies which underpin the IMF’s Special Drawing Rights.

Other ideas include encouraging a greater role for the SDR itself as a reserve currency, in an effort to move away from reliance on the U.S. dollar, officials say.

France also hopes to make more progress on the issue of “global safety nets” — mechanisms for protecting vulnerable economies, particularly in the developing world — from brusque swings in global capital flows, an issue which was already discussed under South Korea’s presidency of the G20.

Editing by John Irish and Susan Fenton

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