G-7 confident on economies, sanguine on fragile U.S. dollar

Randall Palmer,HALIFAX, Nova Scotia, Reuters

Finance ministers from the world’s rich nations were coolly confident on Saturday about the recovering world economy, and sanguine about the euro’s rise against fragile U.S. dollar.

With anti-capitalist demonstrators pushing up against police barricades outside, the ministers — from Britain, Canada, France, Germany, Italy, Japan and the United States — also agreed that more aid to the poorest countries should be provided in the form of grants instead of loans.

And they urged debt-ridden Argentina to develop a credible and sustainable plan to recover from its economic crisis, but in terms of the global economy they voiced satisfaction with their progress in emerging from last year’s downturn.

“Since we last met (in April), growth in our economies has strengthened and should continue to consolidate throughout the year,” ministers from the Group of Seven (G-7) leading industrialized nations stated after 1-1/2 days of talks.

“We are thus confident about our future prospects.” U.S. Treasury Secretary Paul O’Neill said his country — second to Canada in the G-7 growth table but with a far larger economy — was still acting as an engine for the global recovery. U.S. growth, he added, should be stabilizing at 3 to 3.5 percent by the end of 2002.

“I do believe the United States is playing an appropriate locomotive role…in moving the world economy back to a general rate of growth of over 3 percent,” O’Neill said.

He and the conference chairman, Canadian Finance Minister John Manley, acknowledged that risks remained.

“I think that the indication that we are acknowledging that there are risks in the world is simply a realistic assessment. There are always risks in the economy regardless of whatever stage we happen to be in,” O’Neill said.

Japan and Europe have voiced concerns that the dollar’s recent depreciation after years of strength might derail shaky growth in their areas, but the ministers of European powerhouses France and Germany said this was not a problem. Please see G-7 on page

“The success of German exporters doesn’t depend on the euro exchange rate, the German economy is very competitive and has excellent products and against this background there are no reasons at all for concern,” Germany’s Hans Eichel said.

France’s new minister, Francis Mer, said a huge slide in the dollar could be a problem but that the current change was not hurting the economy and was helping limit European inflation.

“If the euro continues to appreciate against the dollar, at some stage it might start to create some problems, but we’re not there yet,” he said. A strengthening euro would make euro zone nations’ exports more expensive in other markets.

Mer said the Japanese central bank’s recent intervention to brake the dollar’s slide was not very effective.

U.S. companies recently urged the Treasury to press Japan to stop such action, but despite this, O’Neill reiterated his government’s “strong-dollar policy.”

Outside the convention center where the ministers were meeting at this Atlantic port, shouting protesters armed with marbles and ball-bearings pressed against a line of police in riot gear, provoking a response of tear gas or pepper spray.

“I was here to demonstrate. I was teargassed. It’s against our constitutional right,” said one man who gave his name only as Brian and said he was from Halifax.

Halifax police said 35 people had been arrested. It was not immediately known if any would be charged.

In recent years, dissidents have sought to hamper virtually every major international economic meeting, arguing that the rich nations hurt the poor with their free-market policies.

The G-7 endorsed steps to encourage debt forgiveness for poor countries. And they agreed that 18 to 21 percent of future aid from the World Bank to the neediest nations be in the form of grants.

U.S. President George W. Bush has said it was pointless to give poor nations loans that will burden them further and will not be paid back, and had advocated 50 percent grants. The new target range was reached in comprise with objecting Europeans.