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Emerging markets are not 
at risk of crisis: Moscovici

French minister calls for cooperation between G-20 nations

French Finance Minister Pierre Moscovici said emerging markets aren’t at risk of a crisis due to Federal Reserve tapering and called for cooperation between Group of 20 nations to support growth.

“I don’t think we are at risk of a crisis because the normalisation, I would say, of monetary policy of the US was not unexpected,” Moscovici said in an interview with Bloomberg Television in Sydney on Saturday. The Fed’s tapering of asset purchases isn’t “led in a way that doesn’t consider the rest of the world,” he said.

G-20 finance chiefs meeting in Sydney have put growth at the heart of their agenda amid concerns a market sell-off in developing countries could undermine the global economy. While nations from India to South Africa have blamed the Fed’s dial-back of unprecedented stimulus measures for roiling financial markets, policy makers from developed economies have put the onus on their emerging counterparts to take more action to boost expansion and combat flaws such as current-account gaps.

US Treasury Secretary Jacob J. Lew said on Friday that emerging markets need “to have their fiscal house in order, have their structural reforms in place,” while UK Chancellor of the Exchequer George Osborne said that the Fed’s pulling back of stimulus “has been used by some countries, frankly, as an excuse.”

Moscovici rejected any suggestion that talks may sour between developed and emerging nations.

“There is no fight, there is no opposition,” he said. “There is the common idea that we need to develop growth all over the world and to fight the places where some tensions are raised.”

The G-20 will back the normalisation of monetary policy in advanced countries and pledge to take “concrete actions” to bolster growth, according to a draft communique seen by Bloomberg News. The group will also pledge its central banks will carefully calibrate and clearly communicate monetary policy.

G-20 host Australia is pushing for a growth target, an idea that’s met with support from the International Monetary Fund, South Korea and the UK, and skepticism from Germany. The draft cites analysis that ambitious policies could raise collective gross domestic product by “at least two per cent” above the trajectory implied by current settings over five years.

“The meeting of the G-20 is about growth and I favour this,” Moscovici said. “We have a capacity through more cooperation to have more growth by something like two per cent in the next five years, 0.5 per cent per year.”

Moscovici rebutted speculation that the eurozone may be experiencing deflation. Inflation slowed to 0.7 per cent in January, moving away from the European Central Bank’s two per cent target and stirring concern that stagnant or falling prices may mire the economy. Barclays and Morgan Stanley are among those warning of the risk of Japan-style deflation.