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G20 end currency dispute, Merkel hails summit as success for Germany

Chancellor Angela Merkel has assessed the G20 summit as a success. She praised the new "atmosphere of cooperation" among the world's economic powers, singling out a move to not impose caps on trade surpluses.

Germany's Chancellor Angela Merkel delivers a speech during the G20 in Seoul

Merkel was pleased with the cooperation of other G20 members

German Chancellor Angela Merkel said at the close of the G20 summit in Seoul on Friday that she sees growing willingness on the part of the world's leading economic nations to cooperate on economic and political issues.

"Germany is of course very pleased that the cooperative atmosphere was the victor here, […] that all participants have clearly endorsed a spirit of working together," Merkel said in the Korean capital after two days of negotiations had come to an end.

The final communiqué at the fifth G20 gathering since the financial crisis in 2008 attempted to recreate the unity forged in crisis two years ago.

On the most contentious issue, exchange rates, leaders agreed to "move toward more market-determined exchange rate systems" and shun competitive devaluations of their currencies. But any talk of "undervalued" currencies was dropped because of Chinese opposition.

Leaders of the G20 meet in the opening plenary

The G20 scrambled to reach a compromise on currency

Leaders also agreed on vague "indicative guidelines" measuring imbalances in the growth of their economies but left the details to be discussed in the first half of next year.

Merkel went on to say that the Seoul summit was particularly productive for Germany's export-driven economy, and that the "exhausting and difficult" negotiations would benefit German companies in the export industry and create jobs.

She was referring to a decision endorsed by all G20 members - including the United States - to not impose caps on trade surpluses, which is crucial for major exporters like Germany and China, who were keen to defend the recent boost their economies have enjoyed by exporting significantly more than they import each year.

Merkel wins battle of wills with Obama

Merkel announced late on Thursday in Seoul that the issue of current account imbalances - which arise when a country has either a large surplus or deficit in international trade - will not be addressed by imposing fixed limits.

"We believe that politically imposed upper limits on trade surpluses or deficits are neither economically justified nor politically appropriate," Merkel said earlier on Thursday. "Instead, I believe that free trade should be our focus; that the competitiveness of individual market players should not be undermined by political limitations."

President Barack Obama, right, with German Chancellor Angela Merkel

In front of cameras, it was all smiles for Obama and Merkel

The idea of such limits had been floated by US President Barack Obama, whose import-dependent country is sliding deeper and deeper into debt, due in part to its trade deficit.

"Countries like Germany that export, benefit heavily from our open markets and us buying their goods," Obama said, adding that helping the US recover would be in the interest of the entire world economy.

Instead of the cap advocated by Washington, G20 leaders are expected to discuss what negotiators called an "early warning system," designed to recognize when a country's surpluses or deficits of trade or capital reserves start to get out of control, so that action could be taken if necessary.

"We can still talk about imbalances in the world; what we can't do is limit a country's competitiveness to a specific number. We believe that would be counter-productive. And I think that everyone has now given up on this idea."

Author: Gabriel Borrud, Mark Hallam (dpa, AP, Reuters)
Editor: Rob Turner

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