Cautiously upbeat about the future, finance ministers from the world’s top economic powers acknowledged Saturday that the global economy had slowed faster than expected but insisted it was primed for a turnaround.
The outlook, to be detailed later, will focus on healthy economic data as a cornerstone for economic recovery, a source close to Saturday’s talks said.
But ministers will also warn that high and volatile oil prices remain a wild card that could still trigger a worsening crisis.
To counter the threat, ministers agreed Saturday to strengthen the international financial system, liberalize access to capital markets and launch another trade round to spur free trade, the source said.
Other focal points of Saturday’s talks included debt relief for poor nations, stamping out money laundering, cracking down on tax havens and furthering economic reforms in Russia.
The one-day Group of Seven, or G-7, meeting involved top finance officials from the United States, Japan, Germany, France, Britain, Italy and Canada. Russian officials were there for bilateral talks on the sidelines of the main event.
The delegations were preparing the economics agenda for a July 20-22 summit of G-8 leaders in the northern Italian city of Genoa.
With the United States moving aggressively to stave off recession, U.S. Treasury Secretary Paul O’Neill was expected to press his European counterparts on what they intend to do to promote growth.
Germany and France — Europe’s two biggest economies — have slashed their growth estimates just as the United States shows signs of improvement. O’Neill suggested before departing for Rome that a continuing tailspin in Europe could undermine the U.S. comeback.
“When we slow down, they feel it. And I think it’s true that we are also on the other end of that sometimes,” he said Thursday in Washington.
O’Neill can point to the Bush administration’s US$1.35 trillion tax cut and a series of interest rate reductions by the Federal Reserve — putting Europe and Japan on the spot.
After a morning meeting between O’Neill and his Japanese counterpart Finance Minister Masajuro Shiokawa, O’Neill spokeswoman Michele Davis said O’Neill had “expressed appreciation” for Japan’s economic reform efforts, calling them “vigorous” and “comprehensive.”
The Japanese government has pledged to tackle a number of thorny issues, including measures to help banks write off huge sums of soured loans and steps to rein in wasteful public spending.
German Finance Minister Hans Eichel, on the other hand, talked up the resilience of the European economy, saying it is stronger than that of the United States and Japan.
“In Germany, there are some positive signals. We have overcome the peak of inflation,” Eichel said at the Saturday morning briefing.
But Eichel also stressed the euro zone’s dependence on a quick U.S. rebound, adding that a recovery could begin in the second half of the year.
Britain’s treasury secretary, Gordon Brown, said the worst is yet to come.
“The downturn in the world economy has not yet reached the bottom,” he said in a British Broadcasting Corp. radio interview before the meeting.
He said the Frankfurt-based European Central Bank should follow the lead of the United States and Japan and lower interest rates to stimulate the euro.
“We must recognize that this is a global problem,” he said. “Europe, too, must engage in economic reform.”
Britain does not use the struggling euro.