Sarkozy takes G20 chair with pledge to toe IMF line

The G20’s incoming chairman, French President Nicolas Sarkozy, says he will work with the International Monetary Fund (IMF) and exercise “responsibility and realism” at the head of  the group of leading economies. Sarkozy was speaking in Seoul, where G20 leaders on Friday endorsed tighter financial regulations and promised to refrain from "competitive devaluation of currencies".

REUTERS/Philippe Wojazer

As the latest summit ended in South Korea, Sarkozy said he would work “hand-in-hand” with the IMF on global reforms. He is due to meet IMF chief, Dominique Strauss Kahn, next month.

Earlier, G20 nations agreed to avoid tit-for-tat currency devaluations, develop guidelines to prevent trade imbalances and press ahead with new regulations on "too big to fail" banks.

The United States wanted countries to commit to ambitious current account targets to end trade imbalances. But it faced opposition from China and major exporters like Brazil and Germany.

Chinese President Hu Jintao called on the United States to adopt "responsible policies" and to maintain a stable dollar.

"The international financial markets are volatile, the fluctuation in the major currencies is large, prices of commodities are high, and there is a clear rise in protectionism," he said.

For his part, US President Barack Obama said there should be no controversy about fixing imbalances "that helped to contribute" to the global economic crisis.

The US, however, has been condemned after the Federal Reserve recently approved a 600-billion-dollar (438-billion-euro) effort to reflate the economy. Critics say the decision could lead to further currency devaluations.

Meanwhile, Obama said that he hopes that China will move its "devalued" yuan to a level set by the market.

"It is undervalued and China spends enormous amounts of money intervening in the market to keep it undervalued," Obama said. “It is important for China in a gradual fashion to transition to a market-based system."