Geithner says exchange rates key to global monetary problems

NANJING, China, March 31 (Reuters) – Inconsistency in
exchange rate policies is the most important problem in the
international monetary system, with some countries running
tightly managed currency regimes that harm the global economy,
U.S. Treasury Secretary Timothy Geithner told a G20 meeting on
Thursday.

The solution to the problem is not complicated, he said.
Rather than a new treaty or new institution, all that is needed
is national action, Geithner said.

“We have been engaged in a careful multilateral effort in
the G20 to establish stronger norms for exchange rate policy,”
he said, according to a prepared text of his remarks.

He was addressing a seminar of the Group of 20 wealthy and
developing economies in the eastern Chinese city of Nanjing. He
was on a panel slated to discuss the current state of the
international monetary system and its shortcomings.

Geithner also said that he supported reforms to change the
composition of the Special Drawing Right, a unit of account used
by the International Monetary Fund.

“Over time, we believe that currencies of large economies
heavily used in international trade and financial transactions
should become part of the SDR basket, and that to achieve this
objective, the concerned countries should have flexible exchange
rate systems, independent central banks, and permit the free
movement of capital flows,” he said.

Emphasising that the solution to the international monetary
system’s problems rest at the national level, Geithner said he
recognised that United States was working to address policy
failures that caused damage in the global financial crisis.

“We are committed to … fiscal reforms that will reduce
deficits as a share of the economy to three percent over the
next several years so that we stabilize the ratio of debt to GDP
at a level that will not threaten future economic growth,” he
said.

(Reporting by Simon Rabinovitch; Editing by Ken Wills)

Geithner says exchange rates key to global monetary problems