The United States struggled today to win backing for its proposal of setting numerical targets for external imbalances as a way of pressing surplus countries such as China to let their exchange rates rise.
Germany's economy minister Rainer Bruederle, who is attended a meeting of G20 finance ministers in South Korea in place of Germany's hospitalised finance minister, said the Group of 20 leading economic powers must correct the errors that have led to imbalances but must rely on market processes to do so.
"We need a strengthening of the market economy processes," Mr Bruederle told reporters on the sidelines of the G20 meeting, warning against "a fallback into planned economy thinking".
"We must correct undesirable economic developments that lead to imbalances," he added.
Earlier, US treasury secretary Timothy Geithner, in a letter to finance leaders seen by Reuters, called for more proactive moves by both developed and developing countries.
"Countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth," he said.
Mr Geithner's overtures have already been rejected by countries as diverse as India and Japan and Bruederle's comments further dent prospects of the G20 agreeing a universal deal that would address global economic imbalances and tackle attempts by many emerging economies and others to weaken their currencies.
Mr Bruederle said finance ministers from the Group of Seven countries recognised at an earlier meeting today that Germany had made an important contribution to the recovery of the global economy.
The G20 needed to tackle the root causes of the world's economic troubles, he added.
"We need more balance, more stability in the global economic growth process," Mr Bruederle said, adding that the International Monetary Fund should take a stronger monitoring role.
Russian deputy finance minister Dmitry Pankin said the draft communique to be issued tomorrow would stay clear of numerical targets.
"The communique is very politically correct. There's nothing sharp in it," Mr Pankin said. "In the long term the focus should be on the exchange rates reflecting market conditions. Excessive state interference in currencies should be avoided."
Japanese finance minister Yoshihiko Noda also voiced scepticism about Mr Geithner's proposal.
"We said that we doubt whether rigid numerical targets should be set. But when checking the progress in rectifying imbalances, that might be an idea," he told reporters.
The criticism underscored the difficulties facing the G20 as it strives to put the world economy on a more stable footing and defuse currency tensions that economists fear could trigger trade wars.
While the G20 won praise for coordination of stimulus packages during the global financial crisis, its unity has been tested by low growth in rich countries and various attempts by emerging market economies to preserve their export competitiveness by holding down their exchange rates.
Reuters