BERLIN, Nov 17: The rise in oil prices and the decline of the dollar are expected to fuel discussions at a Group of 20 meeting of the most influential economies opening on Friday in Berlin.
Created in 1999, the informal forum gathers the finance ministers and central bank governors from G-20 members for discussions aimed at improving the international financial and monetary system. But it has made scant headway to date.
On the wealthy industrialized side of the G-20 are the Group of Seven nations - Britain, Canada, France, Germany, Italy, Japan and the United States - and the European Union.
The major emerging economies contingent is dominated by heavyweight China, which for the first time was allowed to join a recent G7 finance ministers' dinner in Washington. It also includes Argentina, Australia, Brazil, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
With the presence of several major oil-producing countries, including kingpin Saudi Arabia, the issue of the high price of crude "will play a major role," said the meeting's host, German Finance Minister Hans Eichel.
The group will discuss "the means to undertake in the medium-term to align supply and demand," he said. The high price of oil has been fuelling inflation and weighing on growth in oil consumers such as the European Union and Japan, which hit a rough patch in the third quarter.
Another braking factor is the decline in the dollar and the currencies of the dollar zone, such as the Chinese yuan, in particular against the euro and the yen. "This could play a part in our general discussions," Caio Koch-Weser, state secretary at the German finance ministry, said diplomatically.
However, few concrete advances were expected from the meeting, which ends on Sunday. US Treasury Secretary John Snow, who will represent his country at the forum, already has ruled out any coordinated intervention to stem the dollar's slide, saying "currency values are best set in open and competitive exchange markets." Instead, he suggested that Europeans pursue their structural reforms to promote growth.
On the Chinese side, Vice Finance Minister Lou Jiwei said last week that "China has no need to readjust its forex rate" for the moment. At the G-20 meeting, the Chinese delegation was expected to reiterate its intention to reform its forex regime without setting a timeline for loosening the yuan's peg to the dollar.
Western countries argue that the nearly decade-old peg gives China an unfair competitive advantage by making its exports relatively cheaper. Yet quietly, Washington and Beijing have adjusted to the current state of affairs that allows Asian economies to flood the US market with exports. In return Asian economies partially finance the huge budget and current account deficits of the world's largest economy.
With such internationally critical issues grabbing attention, other subjects on the G-20 programme could take a back seat. Among them is a goal of setting a "good conduct" code for financial crises management, mainly regarding debt, between creditor and debtor countries.
Others include strengthening the exchange of information, on a non-binding basis, to discourage tax evasion, and finding a common approach to deal with problems linked to aging populations. -AFP
