Sarkozy Backs IMF as Currency Enforcer at G-20 China Opening

The International Monetary Fund should get the power to police rules envisioned to promote currency-market stability, French President Nicolas Sarkozy told Group of 20 finance chiefs in Nanjing, China.
“Greater supervision by the IMF” of nations’ balance of payments and reserves “appears indispensible,” Sarkozy said today in remarks prepared for a one-day seminar that he initiated. “France supports modifying the IMF’s status to expand its oversight capacity.”

With France holding the presidency of the G-20 this year, Sarkozy has made the monetary system one of his priorities. In his opening remarks, he omitted mention of the two biggest economies -- the U.S. and China -- whose policy makers have been criticized for keeping their currencies weak to promote growth.
Sarkozy sought to summon the G-20’s unity at the height of the global financial crisis in 2009. Now, nations pursuing their own interests risked a “proliferation of unilateral measures during crises resulting in a new financial protectionism in which all economies suffer,” he said.

The conference, attended by economists including Nobel laureate Robert Mundell and Jim O’Neill, chairman of Global Sachs Asset Management, is intended to lay the groundwork for an agreement at the G-20 summit in Cannes, France, in November that would lead to a more “stable and resilient” monetary order, said the French leader, who is up for re-election next year.

G-20 Disputes

The last gathering of G-20 finance ministers in February underscored the difficulties, with China fighting against the inclusion of foreign-exchange reserves as a yardstick for gauging global imbalances. Sarkozy views China’s decision to host the conference as a first step toward a more flexible yuan that should result in its inclusion in the IMF’s currency basket, known as Special Drawing Rights, according to a French official who spoke to reporters before the gathering.

Chinese President Hu Jintao told Sarkozy yesterday in Beijing that China views the internationalization of the yuan as inevitable, with only the pace of the move in question, the French official said.
In promoting the IMF’s role, Sarkozy would boost the power and prestige of a potential presidential challenger in 2012, IMF Managing Director Dominique Strauss Kahn. Strauss-Kahn, a former Socialist finance minister who has yet to announce his intentions, would be the top vote-getter, French polls show.
--James Hertling. Editors: Paul Panckhurst, Stephanie Phang.