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The leaders of the G20 countries have succeeded in agreeing a compromise during their summit in Seoul which is trying to take into account the interests of all members. Whether it will succeed will depend on the implementation of all the commitments laid out on 18 pages. A dose of relief brings the point which foresees the promises to be subjected to control and supervision. However, this point does not envisage any sanctions as we are used to in the European Union, but nonetheless it is an attempt in the right direction.

And as a lot has been said before and during the summit about forthcoming currency wars, the compromise regarding exchange rates sounds like this: "We reaffirm the importance of central banks’ commitment to price stability, thereby contributing to the recovery and sustainable growth. We will move toward more market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying economic fundamentals and refrain from competitive devaluation of currencies", the final communique from the summit reads. Besides, the twenty agreed to revive their efforts for a stable and well functioning international monetary system and called on the International Monetary Fund to deepen its work in these areas.

Quite naturally, on a second place after the compromise for exchange rates the commitments on trade and developments are written in the communique. In this point the twenty promise to refrain from introducing, and oppose protectionist trade actions in all forms, including in the financial sector. Given the various speed of economic recovery and also the countries with low income per capita, the G20 leaders will undertake measures to boost growth in developing countries, especially in the areas of infrastructure, human resources, trade, private investments and employment, food safety, financial inclusion.

As a continuation of the Toronto summit this summer, advanced economies promise to formulate and implement clear, credible, ambitious and growth-friendly medium-term fiscal consolidation plans, aligned of course with national circumstances. In the same time the global standards for implementation of financial reform will be increased on a national and international level through avoiding market fragmentation and protectionism. What must have satisfied the European Union to a great extent is the decision all G20 countries to apply entirely the new bank capital and liquidity standards (known as the Basel III), as well as to undertake measures to solve the problems with the too-big-to-fail firms.

Aside from more work on the reform of financial regulation, the G20 countries have committed also to undertake a range of structural reforms, aimed at boosting and sustaining global demand, foster job creation and rebalancing. For the purpose the countries agree to simplify regulation and regulation barriers in order to facilitate competitiveness and to strengthen productivity in key sectors. Separately, labour markets and human resources development will be a priority in the structural reforms with a focus on education and skills.

With regard to another much discussed in Seoul issue - imbalances - the communiques states that multilateral cooperation will be enhanced to create external sustainability and reduction of excessive imbalances. For the purpose the leaders call on finance ministers and central bank governors of the G20 to agree indicative guidelines that would take into account national or regional circumstances, including large commodity producers. The idea of these indicative guidelines is to enable identification of large imbalances so that preventive and corrective measures to be taken. The guidelines will be developed mainly by the IMF and the G20 working group and then will be discussed by the ministers of finance and central bank governors in the first half of next year.

The more specific part of the communique is the most interesting one. The countries with sustainable and significant external deficits (like the US and Britain, for example) commit to apprehend policies that would support private savings and where necessary to undertake fiscal consolidation, by at the same time keeping their markets open and enhancing the export sector. And the countries with sustainable and significant surpluses (like China and Germany) promise to strengthen the internal sources of growth.

Right after these points there is a short text, giving reasons to believe that the commitments could be implemented. A multiannual action plan will be developed that would include a mechanism for surveillance how commitments are being implemented as well as for an assessment of progress of the targets agreed.

And another thing that should make the EU happy, the G20 reaffirmed its commitment to work consistently and in a non-discriminating way to enhance regulation and supervision of hedge funds, OTC derivatives and credit rating agencies.

Oil as part of economic growth

In the end of their communique the G20 leaders have written another point, concerning oil prices. They invite the OPEC (oil exporting countries) and the International Energy Agency to prepare a report, suggesting specific steps in order to improve the quality, timeliness and reliability of the data and prices.

Separately, these organisations will have to develop a strategy that should include a time frame and will explore the ways to improve data availability on oil production, consumption, refining and stock levels. An intermediate report should be submitted to the February 2011 Finance Ministers’ meeting. And by April, these organisations should submit the final report on how the oil spot market prices are assessed by oil price reporting agencies and how this affects the transparency and functioning of oil markets.

Corruption impedes economic growth and development

Another important point in the Seoul summit communique is the admission that corruption severely impedes economic growth and development. This is why the twenty have endorsed an Anti-Corruption Action Plan. A key element in this plan is the promise to adopt and enforce laws against the bribery of foreign public officials; prevent access of corrupt officials to the global financial system; consider a cooperative framework for the denial of entry to corrupt officials, extradition, and asset recovery.

In spite of the expectations the Seoul summit to fire the first shot in the currency and trade wars, obviously reason had prevailed, given the commitments and measures undertaken. There is still a long way to go until these measures are implemented in all member countries and even more time would be necessary for these measures to have an impact on global economy and, most of all, on global imbalances.

On euinside you can expect a comparative analysis of the implementation of commitments of the leading economies so far, without those agreed on Thursday and Friday in South Korea.