G20 has to show compromise FX pact packs meaning

By Alan Wheatley, Global Economics Correspondent

GYEONGJU, South Korea (BestGrowthStock) – Excited talk of currency wars has given way to an uneasy truce, but what has so far been a phony war could yet break out into outright hostilities.

For the statement thrashed out among finance ministers of the Group of 20 leading economies in South Korea at the weekend did no more than paper over the radically different views of the two main belligerents — the United States and China.

Sometimes international meetings sow the seeds of understandings that, over time, bear policy fruit. But most times what you see is what you get.

And what world markets saw in Gyeongju was two countries poles apart on who is responsible for global imbalances that are generating currency volatility and threaten to spill over into 1930s-style protectionism — at a time when the world economic recovery, in the words of the G20, is “fragile and uneven.”

“On the currencies, I would have liked to have seen more substantive progress there,” said Canadian Finance Minister Jim Flaherty.

“We did make directional progress,” he said, but added: “There was a lot of push back from China and some of the other countries as well. I think there’s nervousness about the fragility of the economic recovery.”

Washington pressed its case that countries with big external surpluses, primarily China, need to let their currencies rise.

The result? A call in the communiqu