FRANCE'S ECONOMY MINISTER SAYS G-20 IMBALANCES DEAL WOULD BE BIG STEP

Paris, February 17 (Reuters)- G-20 countries will have made major progress this weekend if they clinch a broad accord in principle on measures used to benchmark and address mismatches in the world economy, France's economy minister said on Thursday.

France's Economy Minister Lagarde attends a news conference in Paris Enlarge photo Christine Lagarde, who hosts a meeting of finance ministers on Friday and Saturday, also said in an interview on France Info radio that it would be good if China moved towards a more freely set exchange rate.

Global economic imbalances had waned somewhat during the major downturn of recent years but were growing again as the economy recovered, said Lagarde.

"That can't go on too long as it produces big imbalances. As is often the case with big imbalances, a system collapses," she said on France Info radio in an interview.

The big picture of imbalances was a world where China saved and exported, Europe consumed and the United States borrowed and consumed, and this was where the G-20 needed to make progress to make sure there was an element of equilibrium, she said.

"We will already have taken a big step forward if we get an agreement in principle on the elements that allow us to measure imbalances," she said of the meeting taking place in France, which is president this year of the G-20 powers that together represent about 85 percent of world GDP.

Regarding China's exchange rate, which is closely guided by the state, Lagarde said:

"We all have every interest in ensuring global balance. We can start towards that with these indicators. It can also be addressed through monetary channels, by seeing to it for example that the Chinese currency is not as controlled as it is now and that it also becomes an international, convertible, floating currency, as are most currencies in developed countries”.

G-20 countries have been working for some time on ways of working together to correct mismatches in the global economy following the worst downturn since World War Two but have yet to reach agreement on the starting point -which indicators they use to judge if countries should alter economic policy.

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