USA: World Bank President Robert Zoellick says currency tensions can lead to trouble if not properly managed

Record ID: 560603

  • Title: USA: World Bank President Robert Zoellick says currency tensions can lead to trouble if not properly managed
  • Date: 8th October 2010
  • Summary: WASHINGTON, D.C., UNITED STATES (OCTOBER 7, 2010) (REUTERS) WORLD BANK PRESIDENT ROBERT ZOELLICK ADDRESSING REPORTERS (SOUNDBITE) (English) ROBERT ZOELLICK, WORLD BANK PRESIDENT SAYING: "As far as the crisis is concerned, the world economy is recovering. That's the good news, but it's recovering at too slow a pace to bring down employment significantly, particularly in a number of the developed countries and whenever you have high unemployment, you have the risk of other tensions. We see this now in debates on currencies. Developed countries are easing monetary policies. Some developing countries are tightening in response to growth. Some surplus countries are intervening to cover the value of their currencies to boost exports, and all this is causing international tensions. History shows there is no future in beggar-thy-neighbor policies and in an increasingly connected world we need not just to be conscious of the negative effects that policies can have on others, but we need to act accordingly. Today we face currency tensions. Tensions can lead to trouble if not properly managed." WIDE OF NEWS CONFERENCE (SOUNDBITE) (English) ROBERT ZOELLICK, WORLD BANK PRESIDENT SAYING: "So, for example, I've emphasized in the case of China, while I believe the currency should appreciate, that's not a silver bullet and this will have to go to some of the issues switching the savings consumption balance. We've talked to the Chinese about some ways to do that. The Chinese have expressed themselves interest and are building it into their five year plan. But its not only the responsibility of the Chinese. The U.S. has the reverse situation. It has relatively lower savings and higher consumption, so these will be issues the U.S will need to deal with in terms of spending and budget issues." WIDE OF ZOELLICK SPEAKING TO REPORTERS
  • Embargoed: 23rd October 2010 13:00
  • Keywords:
  • Location: Usa
  • Country: USA
  • Topics: International Relations,Finance
  • Reuters ID: LVACHGNIK0VZ5Y2H20DWPCMVFL0O
  • Story Text: World Bank President Robert Zoellick said on Thursday (October 7) currency tensions could lead to trouble "if not properly managed".
    "History shows there is no future in beggar-thy-neighbor policies and in an increasingly connected world we need not just to be conscious of the negative effects that policies can have on others, but we need to act accordingly. Today we face currency tensions. Tensions can lead to trouble if not properly managed," Zoellick said.
    He suggested international agencies such as the IMF and World Trade Organization could help manage currency tensions before they erupt into something more damaging.
    Fears of global currency and trade wars, which were key factors in the Great Depression, have jumped to the top of the agenda at IMF and World Bank meetings this weekend, and are also expected to be a primary topic of discussion when Group of Seven finance leaders gather on Friday (October 8).
    These meetings are expected to provide a forum for intense discussions about efforts to persuade China to let its currency rise and tamp down pressures for other emerging countries to control capital flows as the U.S. dollar weakens.
    The IMF trimmed its 2011 growth forecast for advanced economies on Wednesday and warned the task of reducing heavy government debt burdens, while essential, would put a significant drag on those economies.
    Slow growth at home leaves countries unusually reliant on exports, and this has heightened concerns they will intentionally weaken their currencies to boost trade.
    Zoellick said China's currency should appreciate but that is not a "silver bullet" in solving global imbalances. He said the U.S bears responsibily as well.
    "The U.S. has the reverse situation. It has relatively lower savings and higher consumption, so these will be issues the U.S will need to deal with in terms of spending and budget issues."
    China held the yuan stable during the financial crisis but in June promised to let it respond more freely to market forces, but since then it has risen only about 2 percent against the U.S. dollar.
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