France wants to push the Group of 20 rich and developing economies (G20) to examine ways to curb excessive exchange rate and commodity price volatility and pursue the idea of a financial transactions tax when it takes over the presidency in 2011, French President Nicolas Sarkozy said yesterday (25 August).
Addressing the annual diplomats' conference in Paris, Sarkozy said he would lead the G20 with "action and ambition," proposing a wide debate on the international doctrine of capital movements.
Tackling exchange rate instability
Scaling down his initial proposal for a new Bretton Woods, Sarkozy said he was not seeking a return to fixed exchange rates but that G20 countries needed to find ways to limit excessive exchange rate swings and the economic imbalances they create.
"Who would challenge the fact that exchange rate instability poses a major threat to global economic growth?" asked Sarkozy.
He said that the main current forum for discussion of exchange rates was the narrower G7 club, but added that China must not be excluded from such discussions.
"What we surely need to do is go further and map out a new framework for consultation on exchange rate developments," said Sarkozy.
"But how can we discuss exchange rates nowadays without China? We need to debate a better way of responding on this critical matter."
South Korea currently holds the presidency of the G20, which spans the world's largest industrialised and rapidly developing economies, and Seoul will host a summit in late November before the French take over the reins at the start of 2011.
Sarkozy said that commodity price volatility, highlighted by the current surge in wheat prices, was also highly destructive and G20 countries should regulate commodity derivatives just as they are seeking to do so for other financial derivatives.
"That way we will limit speculation," he said.
France, Sarkozy told diplomats, will push for tighter regulation of commodity derivatives and new international mechanisms, such as insurance schemes and subsidised storage, to reduce fluctuations in the price of wheat and other commodities.
The French leader also stated that his government will table proposals to combat fluctuating energy prices at the November summit in Seoul, as mandated by the group.
Ahead of France's G20 presidency, Sarkozy also proposed the creation of a G20 secretariat which would oversee the implementation of the bloc's decisions.
The G20 was formed in the aftermath of the financial crisis to come up with widespread reform of the international monetary system. But France's president said the bloc should now take on additional responsibilities, especially on development and climate change-related issues.
Sarkozy suggested that the G20 discuss climate funding in view of a global agreement at the November summit, ahead of climate change conference in Cancun in December.
Though little progress has been made since Copenhagen 2009, the French president said that Europe and other developed nations must ''deliver on the commitments taken'' regarding aid to developing countries to fight climate change, innovative funding methods and the protection of forests.