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G20 meeting in France

G20 meeting in France

Finance ministers and central bank heads from the G20 to discuss the deepening European Debt crisis. With the next G20 meeting in Cannes being targeted to announce a solution, this meeting is being viewed as another opportunity to place pressure on the Euro zone states to find a solution to the problem. Today, the S&P has downgraded Spain a notch to AA-, citing the country’s high unemployment, tightening credit and high private sector debt as the reasons.

France and Germany, the two largest economies in the Euro zone, appear to be again diverging on the best solution to solve the Euro zone debt crisis. The Germans would prefer private bond holders to take an increase hair cut on Greek debt. The French, on the other hand, would prefer to see the European Financial Stability Fund being used as a bank which can leverage its position through borrowing from the European Central Bank.

The other topic which will be on the G20 agenda, is the un-pegging of the Yuan against the USD. This is thought to be a necessity in order to narrow the trade deficit between the two countries, with the deficit hitting a record high of $29bn in August. The US senate has approved legislation that would impose tariffs on Chinese products sold in the US, unless the Yuan is allowed to appreciate against the USD.

Meanwhile, the UK yesterday received some encouraging news, with the trade deficit narrowing as exports hit a record high in August. The deficit came in at £7.8bn – a huge £1bn less than predicted. This is encouraging news for the Government, who view the re-positioning of the UK as an exporter being central to its plan for economic growth.

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