POTSDAM, Germany (Thomson Financial) - Following is an at-a-glance guide to the weekend meeting of G8 finance ministers.
ECONOMIC GROWTH
-G8 finance ministers said global growth remains robust and risks to the growth outlook have declined.
-'Global growth remains robust and it is more balanced across regions and within our countries. Risks for the outlook have abated,' the ministers said in the communique issued at the end of their two-day meeting.
-But they added: 'High and volatile energy prices remain a concern and we will remain vigilant.'
-US Deputy Treasury Secretary Robert Kimmitt expressed optimism about the US economy, saying it is making the 'transition to a sustainable growth path'.
-He said he is confident US growth will return towards trend over the year and that the US housing market is stabilising.
-'Rising delinquencies in the subprime mortgage market have not spread more generally,' he added.
FOREX
-As expected, the communique contained no reference to exchange rates. The finance ministers meeting was held to prepare for the June 6-8 G8 summit and central bankers therefore did not attend.
-IMF managing director Rodrigo Rato said China's decision to increase the flexibility of the yuan on the foreign exchange markets was a 'step in the right direction'. On Friday the People's Bank of China widened the yuan's daily trading band against the dollar to 0.5 pct from 0.3 pct, and also increased reserve requirements and interest rates.
-Rato said further tightening of monetary policy in China was just as important as increased currency flexibility. 'It is difficult to apply the monetary policy they need without a more flexible exchange rate system, otherwise there are risks of overheating,' he said.
-German Finance Minister Peer Steinbrueck did not show any concerns about the value of the euro against the yen, his Japanese counterpart Koji Omi said following a bilateral meeting with Steinbrueck. The euro has surged to record highs against the yen in recent weeks.
-Steinbrueck and Omi also welcomed China's move to slightly increase the flexibility of the yuan.
-But Omi said he stood full-square behind the US' position to continue to press for more flexibility of the yuan.
-'We would like even further moves towards a free market,' he said.
-Russian Finance Minister Alexei Kudrin said the current large capital inflows into Russia could pose a major foreign exchange risk.
HEDGE FUNDS
-Ministers called for continued vigilance on risks related to the rapid growth of hedge funds.
-'Given the strong growth of the hedge fund industry and the increasing complexity of the instruments they trade, we reaffirmed the need to be vigilant,' they said.
-'The assessment of potential systemic and operational risks associated with these activities has become more complex and challenging,' they said.
-Ministers said the growth of hedge funds and the emergence of advanced financial techniques and products, such as credit derivatives, have contributed significantly to the efficiency of the financial system.
-But they said the hedge fund industry should review and enhance existing sound practices benchmarks for hedge fund managers.
-Hedge funds should also improve the information they provide to investors and counterparties, they said.
-German Finance Minister Peer Steinbrueck has made discussion of the growth of hedge funds one of his main priorities during the country's stewardship of the G7 and G8 this year. He is looking for a code of conduct for hedge funds to reduce possible risks to financial stability.
-But he said this may not be achieved this year. 'Whether it will come to an implementation as far as monitoring (of hedge funds) is concerned or whether we will come to a specific code of conduct by end of this year or in 2008 is something I don't care about so long as we get there,' he said.
-He said Germany is not looking to impose regulation on hedge funds, but for an agreement to increase transparency between hedge funds and their creditors and investors.
-The finance ministers said they welcomed the update of the Financial Stability Forum to its 2000 Report on Highly Leveraged Institutions and expressed their support for its recommendations.
-The FSF said financial authorities, banks, investors and hedge fund managers need to take further action to counter risks to financial stability from the activities of hedge funds and other highly leveraged institutions.
-The FSF said it will monitor work on its recommendations and report to G7 finance ministers and central bank governors in October on progress made.
WORLD BANK
-Ministers recorded their appreciation to World Bank president Paul Wolfowitz for his work at the bank.
-'We express our appreciation to World Bank president Paul Wolfowitz for his service to the Bank and his commitment to responsible development and poverty reduction, particularly in Africa,' they said.
-Wolfowitz announced on Thursday that he will step down on June 30 following weeks of pressure over the pay and promotion package he arranged for his girlfriend and former fellow bank employee, Shaha Riza.
-Steinbrueck said Wolfowitz had taken the right decision, because the scandal had damaged the reputation of the bank.
-But Steinbrueck said he does not see any reason to change the system under which the US nominates the president of the World Bank.
-Japan and France also agreed that the US should retain the right to choose the World Bank president.
-US Deputy Treasury Secretary Robert Kimmitt refused to rule himself out of the running for the World Bank job.
-Kimmitt said he was 'flattered to be associated with such a prestigious institution as the World Bank'.
-Others touted include former US Trade Representative Robert Zoellick and US Treasury Secretary Henry Paulson. There is even speculation that Tony Blair, who will step down as British Prime Minister at the end of June, may be offered the post.
WTO TRADE TALKS
-Ministers called for increased efforts to reach a deal in the Doha trade round by the end of this year.
-'We remain committed to resisting protectionist sentiment. We should strive to reach an agreement on the core modalities as soon as possible, which will require political will and additional efforts by all parties,' they said.
-'It is necessary to achieve an ambitious, balanced and comprehensive deal that delivers economic benefits for all members, enhances global growth and contributes to poverty reduction,' they said.
CHINA LOANS TO AFRICA
-G8 finance ministers urged China and other countries lending to Africa to adopt 'responsible' practices when giving aid to the continent in order to ensure the money is managed well and can be repaid.
-Without directly naming China, the G8 said: 'We commit to applying responsible practices in our lending decisions. To this end, we urge all borrowers and creditors to share information on their borrowing and lending practices.'
-The statement was contained in a plan on 'Good Financial Governance in Africa', and according to G8 sources, it was meant to call particular attention to China, which they said has excluded the criteria of good governance when lending money to Sudan and Angola.
-Steinbrueck said the issue of ensuring borrowers can manage their debts will only gain acceptance among creditors if other countries such as those in the G20 group adopt the same principles.
-'I am referring to China,' he said.
G8 ENLARGEMENT
-Steinbrueck said the G8 group of leading industrialised nations could well be expanded in the years to come to include some of the world's major emerging economies.
-He said expansion of the club is not on the agenda at the moment but he could see it happening in the years ahead.
-Many observers think the G7/G8 has become outdated given the rapid economic growth seen in countries like China, India and Brazil.
-'I, myself, belong to those who say that one fine day this circle will be extended to some really important countries,' said Steinbrueck.
ABSENTEES
-US Treasury Secretary Henry Paulson missed the meeting, sending Deputy Treasury Secretary Robert Kimmit to represent Washington.
-The US Treasury said Paulson was staying in Washington to prepare for high level trade talks with the Chinese government next week, but some some observers saw his absence as a snub to Steinbrueck, the meeting's host, after he went on holiday with his family to Namibia rather than attend the April meeting of G7 finance ministers in Washington.
-World Bank president Paul Wolfowitz also missed the meeting following his decision to step down from his post at the end of June.
-Consequently, the World Bank had no representation at the meeting.
-Steinbrueck said the World Bank president had been due to lead a debate on an initiative on the recovery of stolen assets, but this will now be postponed to the next meeting at which the World Bank is represented.
-New French Finance Minister Jean-Louis Borloo was also unable to attend, having only been appointed to the post on Friday morning. Treasury director Xavier Musca represented France at the meeting.
EMERGING MARKET BONDS
-Ministers agreed an action plan on the development of local bond markets in emerging and developing countries, with the aim of reducing foreign exchange risks for local borrowers and fostering economic growth.
-The plan calls for the strengthening of market infrastructure and public debt management, a diversification of the investor base, and the development of derivative and swap markets. steve.whitehouse@thomson.com mog/pp/sw/vlb COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.