Group of Seven presses for steps to fix imbalances
WASHINGTON, April 16: Finance chiefs from the Group of Seven economic powers pledged “vigorous” steps, from deficit reduction to reform, to fix global economic imbalances and guard growth from headwinds including higher oil prices. “Subdued inflationary pressures, appropriate monetary policies and favorable financing conditions are supporting the outlook. But challenges remain,” ministers from the richest industrial nations said in a statement after their meeting.
“Higher oil prices are a headwind and the expansion is less balanced than before,” they said.
The G7 finance leaders pressed for changes to fix global imbalances, saying reform is needed to foster growth.
Such actions include fiscal consolidation in the United States, further structural reforms in Europe and structural reforms — including fiscal consolidation — in Japan, the ministers said.
They also repeated past language that foreign exchange rates should reflect economic fundamentals and that excess volatility and disorderly movements among currencies are undesirable for economic growth.
The currency statement, seen as being aimed squarely at China’s policy of pegging its yuan currency to the U.S. dollar, did not depart from past G7 language.
U.S. lawmakers are frustrated with the administration of President George W. Bush for its inability to pressure China to move more quickly to end its currency peg, which U.S. manufacturers say gives China an unfair trade advantage.
China has said it aims to move gradually to a market-based exchange rate, but Chinese officials — who have in the past sat in on G7 sessions — did not attend the Washington gathering.
The G7 ministers also said they welcomed efforts to improve oil market data and energy efficiency and supply. They acknowledged that high energy prices have a greater impact on developing countries and said the World Bank and International Monetary Fund “have a role” to play in helping poorer countries cope with higher costs.
The G7 meeting occurred on the sidelines of the spring meetings of the IMF and World Bank.
The G7 is composed of Britain, Canada, France, Germany, Italy, Japan and the United States.
The ministers praised Brazil’s decision not to renew its IMF funding program, saying the nation’s economic stewardship had paved the way for that decision.
But they called on Argentina, which recently announced an agreement with some of its debtors to repurchase defaulted debt at a discount, to address creditors who still hold its 2002 defaulted debt. Such a move is seen as key for the country’s return to world markets.
Then, on Sunday, its World Bank counterpart, the Development Committee, will meet, and the heads of both the Bank and the Fund will later hold a news conference.
Group of Seven finance ministers will on Saturday sound out World Bank President-elect Paul Wolfowitz on what direction he plans to take the global development organization under his leadership.—Reuters
