Finance officials of the G20 nations will meet today in Moscow to discuss ways of economic recovery in member countries and provide austerity measures for countries with high deficits.
As well as currency war fears, the decline of Japanese economy against expectations of growth and the contraction of eurozone economy higher than anticipated in the fourth-quarter will be discussed.
Officials will also focus their discussion on the effects of squeezing export markets, as in countries like Japan and Germany a fall in net trade was one of the major factors in the fourth-quarter downturn.
Economic growth in France and Germany fell by 0.3 per cent and 0.6 per cent respectively in the fourth-quarter, while the UK saw a 0.3 per cent quarterly fall.
The Financial Times argues that austerity is needed for countries with high deficits and reliant on mobile investors. But the large euro members with relative fiscal space or captive bond markets like the US and Japan should relax the tightening.
In reality, the so-called currency war is not all bad. If every country debases their currency, the world will get closer to the monetary stimulus necessary to outweigh excessive fiscal zeal.
In addition, uncertainty about the future of structural reforms within European countries and the sequester cuts in the US in the near future should be discussed.
If the officials fail to give right direction for the private sector in their discussions, there is a chance that the bad growth numbers remain in the long-term.