G-20: Sarkozy Wants IMF to act as Forex Supervisor

Thursday, 31 March 2011 00:54

French President Nicolas Sarkozy targeted forex volatility and pleaded for an extension of International Monetary Fund’s mandate to capital account oversight during the G-20 finance ministers reunion in Nanjing, China.

The IMF’s new role would include the enforcement of a monetary “Code of Conduct” in order to diminish the currency imbalances and to avoid the return to fixed rates.

Sarkozy asks for a more flexible international forex market and blames the accumulation of currency reserves as a source of economical imbalance. He also requested that the G-20 play a more active role in currency interventions in order to better represent the globalization of currency forces.

The G-7 countries are currently the only ones that intervene on a common effort to limit forex volatility. It did so recently to counter the yen’s strengthening, in the wake of the Japan tsunami.

At the same reunion, U.S. Treasury Secretary Timothy Geithner seemed to agree with the French President. Without mentioning China, Geithner blamed the lack of flexibility from certain nations: “This asymmetry in exchange rate policies creates a lot of tension [..] it intensifies inflation risk in those emerging economies with undervalued exchange rates. And, finally, it generates protectionist pressures.”