G20 reaches accord on imbalances

19 February 2011 Last updated at 18:54 GMT Ms Lagarde said the deal represented a "spirit of compromise" The G20 have reached a deal on indicators to detect economic imbalances, the French presidency said, after the meeting ended in Paris.

The world's leading economies agreed on a compromise after "frank, sometimes tense" negotiations, French Finance Minister Christine Lagarde said.

The deal was agreed after softening criteria on current account surpluses to get China on board, reports suggest.

The aim is to co-ordinate policies more to avoid another economic crisis.

Ms Lagarde said there had been lengthy discussion on the indicators to be used, after reports that China, sensitive over its currency policy, had resisted the inclusion of some economic indicators.

"The negotiations were frank, sometimes tense, and led to a final compromise which cannot attribute to any one delegation but which I can say represents a spirit of compromise and of ambition," Ms Lagarde told a news conference.

Currency reserves

Interest payments for China's foreign currency reserves will not be included in the calculation of the current account balance, which measures trade and capital flows in and out of a country, an official told AP news agency.

The role of the yuan, and China's accumulation of US dollars, was at the heart of the impasse

As such, the indicator is a compromise between current account balance, sought by most countries, and trade balance, which China had wanted.

The indicators also include public debts and deficits and private debt levels and savings rates.

The BBC's economics correspondent Andrew Walker says the G20 now need to decide how to assess these indicators to identify when a trade imbalance, for example, is a problem, which they aim to do by April.

There is also the question of what action to take when a serious imbalance is identified.

These next steps could be even harder, our correspondent says.

Ms Lagarde said the indicators were not binding targets but would lead to the drafting of guidelines for co-ordinated economic policies.

Some economists say that China and other "mercantilist" countries contributed to the 2008 financial crisis by accumulating excessive foreign currency reserves, especially US dollars.

Many Asian countries began building up their reserves in the wake of a crisis in 1997 that saw many of them forced to painfully devalue their currency.

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