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Tempers flare over global economy ahead of G20

Addison Ray

SEOUL | Wed Nov 10, 2010 2:01am EST

SEOUL (Reuters) - An all-day G20 planning session grew so intense that officials had to leave the door open to keep the room from overheating, underscoring deep tensions over global economic rebalancing one day before the start of a summit.

Deputies drafting a final statement to be released after the Group of 20 summit concludes on Friday remained far apart on pivotal issues, including currency exchange rates, G20 spokesman Kim Yoon Kyung said on Wednesday.

"We had to open the door because the debate was so animated and the room was getting hot," he said.

G20 leaders had hoped this week's gathering, the fifth since the financial crisis exploded in 2008, would mark the beginning of a new era of global cooperation. Hosts South Korea printed banners proclaiming a slogan of "Shared Growth Beyond Crisis."

But the unity forged in crisis has given way to sometimes-competing national policies that reflect a multi-speed recovery from the recession, prompting critics to question the effectiveness of the G20 grouping itself.

The U.S. Federal Reserve's decision last week to spend another $600 billion on government bond purchases has drawn reproaches from four continents and intensified the G20 debate over how best to bolster the global economic recovery and avoid another financial crisis.

Critics charge that the Fed ignored global repercussions -- namely a weaker dollar and a flood of cheap cash that could find its way into emerging markets -- and violated the cooperative spirit the G20 has worked hard to sustain.

The sharp criticism has made it harder for Washington to press China to allow its yuan currency to rise more rapidly, a central issue in the global rebalancing effort.

Underlining that, a Chinese official who has been helping draft the G20 communique said the leaders should not discuss the yuan or any other currency specifically.

However, spot yuan rose to a high of 6.6353 against the dollar on Wednesday, the highest level since the currency's landmark revaluation in July 2005, after the People's Bank of China fixed a record yuan mid-point.

Beijing typically loosens its tight grip on the yuan as a goodwill gesture ahead of political events that apply pressure on China for more yuan appreciation.

Kim, the G20 spokesman, said 40 to 50 deputies were crammed into a small room for a 14-hour session on Tuesday, and voices were raised when they discussed a framework for balanced growth that G20 leaders hope will be a cornerstone of the summit.

Officials left empty brackets in several key sections of what will become the final communique, he said, an acknowledgement they had yet to agree on the language. They reconvened on Wednesday and will continue into Thursday if necessary.

U.N. Secretary-General Ban Ki-moon urged greater G20 cooperation at a "critical moment" for the global economy. "I am concerned by the divergence of opinions on these issues," Ban told a news conference in Seoul. "This is a time for unity."

While the deputies bickered, some leaders sought a calmer tone. British Prime Minister David Cameron said at a Beijing financial conference that the best future for the world economy was to keep trade barriers down.



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