New "Plaza Accord" not on the cards: IMF Chief

Christine Lagarde, the chief of IMF. [Photo by Gao Erqiang/China Daily]

A new "Plaza Accord" to intervene in the foreign exchange market is "not on the cards" of global leaders as they gathered here to discuss ways to address economic woes, International Monetary Fund chief said at a news conference on Saturday.

"Frankly it's just not on the cards, and not debated by finance ministers and central bank governors," Christine Lagarde said when responding to questions about any possible "Plaza Accord".

The Plaza Accord is an agreement between France, West Germany, Japan, the United States and Britain in 1985 that allowed the US dollar to weaken significantly through joint intervention in currency markets.

Market calculation before and during the G20 meeting was that world's top economic decision-makers would seize the chance to strike a deal similar to the Plaza Accord.

However, the communiqué at the end of the meeting disappointed many speculators, which just expressed general rejection of "competitive devaluation". The communiqué said downside risks and vulnerabilities have risen, but the magnitude of recent market volatility "has not reflected the underlying fundamentals of the global economy", reducing the need for aggressive crisis-level response.

"Conditions for that are just not there," Lagarde explained. "(To justify that) you would need a massive misalignment, you would need the set of actions as a result to reach whatever targets identified. We are just not talking about that."

However, she called on G20 nations to have a "renewed sense of urgency", "a renewed sense for collective actions on multiple fronts, including monetary and fiscal policies, and structural reform."

"I called on leaders to go 'bold', go 'broad', go 'together' in implementing these structural reforms," she said.