French President Nicolas Sarkozy warned Friday that putting national interests first will kill off the G20, as ministers met to hammer out common criteria key to ensuring global financial stability.
French President Nicolas Sarkozy gives a speech to G20 central bank governors at the Elysee Palace in Paris.
Sarkozy was talking as finance ministers and central bankers from the 20 top developed and developing economies gathered for two days of talks in Paris which host France hopes will lead to an overhaul of global finance.
But with disagreement spilling into the open over which indicators to base economic reviews of countries and make policy recommendations, the French leader issued a stark warning
"The temptation to give priority to national interests is great. But let me tell you clearly -- that would be the death of the G20," said Sarkozy.
In the wake of 2008 global economic crisis world leaders decided to make the G20 the pre-eminent economic council instead of the G8, aiming to improve economic policy coordination to avoid the emergence of new imbalances and a new crisis.
"If we don't do anything, global imbalances will grow again," warned the French president. Sarkozy has vowed to reform the world monetary system and commodities markets during his year at the G20 helm, saying he aims to defend poor economies from currency and trade turbulence.
But before treating the illness, leaders must agree on the symptoms, so the first official G20 gathering of France's presidency will focus on deciding which indicators will be used to measure the economic gaps between them.
France wants an agreement as soon as possible so that in the second half of this year the International Monetary Fund can make economic policy recommendations to nations.
The so-called "BRICS" group of top emerging nations -- Brazil, Russia, India, China and South Africa -- said Friday they opposed several mooted indicators.
"We agreed we don't want the current account balance as an indicator, we prefer taking into account the goods and services balance," said Brazilian Finance Minister Guido Mantega after the countries held a side meeting.
Russia's Deputy Finance Minister Dmitry Pankin said the BRICS' main concern is if the United States and Britain insist on foreign currency reserves being among the indicators.
The current account balance and foreign exchange reserves are among the five indicators that France and a number of Western countries want to see adopted on Saturday.
The others are public deficits and debt levels, the real exchange rate and private savings, according to sources close to the talks.
Some Western powers see the talks as "a roundabout way of ultimately treating the problem of China," whose huge trade surplus and foreign currency reserves they see as the most important of the global imbalances, a source close to the negotiations said.
The United States and other Western powers accuse China of holding down its currency to boost Chinese exports.
China denies any such manipulation, blaming the imbalance on structural problems in its trade partners' economies. Sarkozy said China had accepted to host a seminar on exchange rate policy in its southern city of Shenzen at the end of next month.
China last year resisted a US proposal to stabilise current account balances by setting a four-percent cap on countries' deficits and surpluses.
US Treasury Secretary Timothy Geithner said using such measures are in the interest of emerging economies as they help ensure financial stability and growth.
If serious economic imbalances re-emerge "then future growth rates will be more at risk and financial stability will be at risk," he said ahead of the formal sessions.
The meetings will culminate in a key news conference by Lagarde on Saturday afternoon and briefings are expected by other delegations.
France and others have also talked of trying to curb the dollar's supremacy as the world currency of reference.The US delegation says it wants to focus more on the effect of volatility in capital flows between countries.