Call for better co-ordination on currencies

France's Economy Minister Christine Lagarde and Bank of France Governor Christian Noyer made a push for better international foreign exchange co-ordination and said there was a need for more stability between the major currencies.

China has pushed for a discussion of reserve currencies at the G8.

"We should explore a better co-ordination of foreign exchange policies which would raise the question over the medium term of the balance of exchange rates and the role of currencies that have changed both as a result of the crisis and the role played by emerging market countries," Lagarde told reporters on the sidelines of a conference.

The minister was responding to a question about the G8 meeting.

Noyer said there was a need for a stable and international currency to avoid a return to protectionism.

"When you see the development of international swaps made in currencies which are neither convertible [nor] transferable, in a certain way that means you are returning to bilateralism in commercial exchanges," Noyer, who is also a governing council member of the European Central Bank.

"We must be really careful about that and maybe we need to make sure there is a greater stability between the big currencies in the period to come."

He also said that one lesson from the international financial crisis was that accumulating foreign exchange reserves was not necessarily a positive thing to do.

"We must avoid a return to the accumulation of foreign exchange," he said.

"That means that in order to compensate a lower accumulation of foreign exchange reserves we need ways to finance world activity, world trade, that's why we need to reinforce the resources of the International Monetary Fund."

Asian Development Bank President Haruhiko Kuroda also said it was important that global imbalances be unwound gradually.

She said the Group of Eight club of rich economies is not that revelant anymore and should be broadened to take in emerging powers.

"The G8 is an older institution and is without a doubt a lot less relevant given its makeup and given developments in the world," Lagarde told reporters in the southern city of Aix-en-Provence where she was attending an economic conference.

Lagarde spoke ahead of the G8 summit opening on Wednesday in L'Aquila, Italy with the leaders of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Over the years, host-countries have invited other world leaders to attend the annual gathering, but the French minister said this was not enough.

"Big players such as emerging economies India, China or Mexico are invited, but only for a minor role on the sidelines of the summit," Lagarde said.

"The G8 must imperatively be changed and expanded to adapt to the reality of our times."

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