G-7 opts for long game on world economy

Fears of imminent recession in several G-7 countries, concerns about Japan-style deflation spreading and the slide in the US dollar drew little direct response. Currency rates were not mentioned in drafts of the final communique.

A communique prepared for publication at the end of the two-day gathering on Saturday provided a ‘to do’ list of ongoing reforms for each country to pursue in order to create a better environment for the private sector to lead economic recovery.

The G-7 countries — the United States, Canada, Japan, Italy, Britain, Germany and host France — said dangers to global growth and prosperity were receding, even if many challenges remained, said the draft, seen by Reuters.

‘We will therefore continue to cooperate to achieve higher growth in all our economies, while ensuring domestic and external sustainability, and thereby to contribute to global growth,’ the draft said. ‘We are strengthening our commitments to structural reforms and sound macroeconomic policies.’

The US said it would encourage job creation by urging more savings and investment by individuals and companies. European nations said they would continue to work for more flexible economies via reforms of labour, product and capital markets.

Japan, grappling with a fresh crisis at one of its leading banks just as the G-7 met, emphasised financial sector reform and the need to fight deflation. There was no suggestion coordinated fiscal, monetary or currency market action was useful or likely.

Despite the apparent ease with the prevailing economic loom, the main goal of the meeting was to tee up a June summit in the French town of Evian where President Jacques Chirac wants everyone to make more vocal commitments to bridging the gap with Africa and other impoverished parts of the world. (Reuters)