G20 leaders brace for currency showdown

Leaders of the Group of 20 faced a showdown over solutions to a currency dispute and global imbalances as their two-day summit opened in Seoul Thursday.

Their negotiators failed to reach a consensus by the opening day heralding tough negotiations among leaders, Seoul officials said.

Hopeful signs emerged, however, as the U.S. and China voiced confidence that the summit would produce a meaningful agreement.

“I’m confident that a positive outcome will be attained during the summit,” Chinese President Hu Jintao was quoted by his aides as saying during a meeting with U.S. President Barack Obama.

Obama said their negotiators had been working on a whole range of issues adding, “We are seeing significant progress.”

Korea’s government officials predicted that a summit agreement on the current account balance issue would mark progress compared to last month’s G20 finance ministerial meeting in Gyeongju.

Korea, as the chair, has been striving to see a step forward from the finance ministers’ agreement during the summit, which will end Friday.

Officials said the G20 leaders were about to agree on the introduction of an “early warning system” which will be initiated by the International Monetary Fund to tackle global current account imbalances.

The early warning indicator is a system under which the IMF will be empowered to take on the regulator role to oversee excessive ratios between GDP and current account surpluses or deficits.

Commission President Jose Manuel Barroso (C) and European Council President Herman Van Rompuy (L) attend a joint press conference at the venue for the G20 Summit in Seoul, capital of South Korea, on Nov. 11. (Xinhua-Yonhap)

“Members have reached a consensus to adopt it,” an official said. “There remains a possibility that the term could be slightly toned down (in the coming joint statement of leaders).”

There is also a possibility that the G20 will agree to set the timetable to discuss the U.S. earlier proposal that the G20 will limit the surplus or deficit on its current account to some percentage of GDP.

Should they agree to fix the timetable, the issue whether to adopt a specific numerical cap on current account surplus or deficit will be a key agenda for the next summit in France, slated for November 2011.

President Lee Myung-bak said that he forecast that leaders will finally reach an agreement on those issues.