G20 summit in Nov must solve fx tensions – EU

* Document says United States must boost savings

* Says China must encourage stronger domestic demand

* Urges exchange rates to be in line with market fundamentals

By Timothy Heritage

BRUSSELS, Oct 22 (BestGrowthStock) – Leaders of the world’s 20
biggest developing and developed economies must solve exchange
rate tensions when they meet in November in Seoul, a European
Commission document showed.

G20 leaders meet on Nov. 11-12 in Korea to try to put the
world economy on a more stable footing and defuse currency
tensions that economists say could trigger trade wars.

“We need a strong action plan coming out of Seoul,” said the
Commission document, obtained by Reuters, on the preparation for
the G20 summit.

“It is key that there will be clear political commitment to
deliver and to provide cooperative and lasting solutions to the
current tensions in particular in currency markets,” it said.

“Countries should also commit to avoid setting exchange
rates at levels not in line with market fundamentals,” it said.

While the G20 won praise for coordination of stimulus
packages during the global financial crisis, its unity has been
tested by low growth in rich countries and attempts by some
emerging market economies to preserve export competitiveness by
holding down their exchange rates.

Saudi Arabia, Germany and Russia are the G20 members with
the biggest current account surpluses, but fellow member China
is the chief culprit in the eyes of the United States and Europe
because of massive currency market intervention to keep a lid on
the yuan.

Beijing has amassed $2.65 trillion in official currency
reserves as a consequence, and prompted the U.S. House of
Representatives to pass a bill threatening retaliation unless
China lets its currency off the leash to reduce its huge trade
surplus with the United States.

“All major economies need to do their part to achieve
economic rebalancing,” the Commission document said.

It said that advanced deficit economies, which in G20 jargon
means the United States, should increase their domestic savings
rate while keeping open markets and raising export
competitiveness.

It said emerging surplus economies — a term used to
describe China — needed to encourage stronger domestic
consumption through better social safety nets and financial
markets, and allow greater flexibility of exchange rate regimes.

“We need to step up our efforts to address more systemic
risks, limit the build-up of excessive reserves and as a result
build a more stable and resilient international monetary
system,” the document said.

The 27-nation EU will be represented at the November summit
by European Commission President Jose Manuel Barroso and by the
President of the European Council Herman van Rompuy.
(Writing by Jan Strupczewski; Editing by Alison Williams)

G20 summit in Nov must solve fx tensions – EU