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UPDATE 2-France hopes for G20 deal on imbalances this week

Published 04/12/2011, 12:23 PM
Updated 04/12/2011, 12:28 PM
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* Aim is to place major economies under tight scrutiny

* To take into account circumstances of each economy

(Recasts, adds Chinese official, details)

PARIS, April 12 (Reuters) - France hopes the G20 can reach agreement this week on guidelines to identify global economic imbalances, with the aim of bringing major economies in particular under closer scrutiny, sources said on Tuesday.

Friday's talks between G20 finance ministers in Washington aim to build on a hard-fought agreement in Paris two months ago in the face of Chinese resistance which laid out a list of economic indicators that can be used to measure imbalances.

These indicators include external measures like trade balances and net investment income flows and domestic ones like the public debt and deficit and private savings.

The idea is to reach agreement on an action plan to be inked in at the final November summit of France's G20 presidency, in the resort of Cannes, to rebalance the world economy and set it on track for balanced and sustainable growth.

French government sources said this week's meeting in Washington, on the sidelines of the IMF and World Bank spring meetings, would aim to agree on how to employ these indicators in practice taking into account each country's circumstances.

"We hope to reach a deal on the methodology this week," said one source, saying the guidelines would include a theoretical aspect based on the type of economy involved and a statistical element measuring the historic norms for each indicator.

"On the basis of this methodology we will examine in a second phase the cause of the global imbalances," said the source.

The G20 will eventually aim to draw up a list of countries or zones which are generating global imbalances, he added, but suggested this was unlikely to take place during this week's meeting.

Those countries would then be subject to a second round of more in-depth assessment, with major economies in particular subject to strict criteria due to their importance for the global economy as a whole.

"We will demand more of the economies which are systemic than countries which are not systemic," he said.

China, the world's second largest economy, fought hard in February to win the exclusion of foreign reserves and exchange rates from the list of indicators and appears likely to resist further efforts to meddle in its economic affairs.

Chinese Vice Finance Minister Li Yong said on Tuesday that the concept of imposing a limit on its current account surplus was a "political tool" of the United States and other developed countries to try to restrain China's economic growth. (Reporting by Daniel Flynn and Yann Le Guernigou; Writing by Catherine Bremer; Editing by Ruth Pitchford)

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