12:23 PM
G20 finds common ground opposing U.S.
Addison Ray
By Emily Kaiser
WASHINGTON | Sun Nov 7, 2010 3:02pm EST
WASHINGTON (Reuters) - The Group of 20 is beginning to look more like the G19 plus 1 as emerging and rich countries alike accuse the United States of breaking a vow of unity.
This week's G20 summit will require every bit of President Barack Obama's diplomacy skills after the Federal Reserve embarked on a new $600 billion bond-buying spree, sparking criticism from four continents that the U.S. central bank was ignoring the global repercussions.
Officials from Germany, Brazil, China and South Africa were among those expressing concern that the Fed's money printing could weaken the dollar, drive up commodity prices and send uncontrollable waves of investor cash into emerging markets.
If the G20 fails to defuse these global tensions, it may heighten investor concerns that policymakers are drifting further apart, leaving the world economy vulnerable to another bout of upheaval.
Domestic politics and policies make Obama's job tougher.
He arrives in Seoul for the November 11-12 summit weakened by a crushing congressional election defeat for his Democratic Party. His primary task will be to convince his peers the Fed's actions do not run counter to a U.S.-led push for global cooperation to even out economic imbalances.
(For a graphic on G20 economies, see link.reuters.com/tah43q)
South African Finance Minister Pravin Gordhan said the Fed's move "undermines the spirit of multilateral cooperation that G20 leaders have fought so hard to maintain during the current crisis."
German Finance Minister Wolfgang Schaeuble was less diplomatic. He called U.S. policy "clueless."
It was less than five months ago that G20 leaders gathered in Toronto, talking in warm and fuzzy terms about "collective well-being" and "shared objectives."
"G20 members have a responsibility to the community of nations to assure the overall health of the global economy," the leaders said in their closing statement in June.
"If we act in a coordinated manner, all regions are better off, now and in the future."
G20 PLUS QE2 = CATCH 22
Since that Toronto meeting, the dollar has dropped 11 percent against a basket of currencies, driving up currencies in Japan, Brazil, the euro zone and elsewhere. The biggest exception is China, where the tightly managed yuan has gained a relatively modest 2 percent versus the dollar since late June.
Obama's response to G20 criticism is expected to be that the world needs a healthy U.S. economy, and the U.S. economy needs healthier exports.
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