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G-7 finance officials express confidence in global economy despite risks

G-7 finance officials express confidence in global economy despite risks

Finance officials from the world's wealthiest countries expressed confidence that the global economy will experience strong growth despite risks.
"Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced," the finance ministers and central bank presidents said in a joint statement Friday.
The officials from the world's seven leading industrial countries _ Britain, Japan, Canada, France, Germany, Italy and the United States _ projected confidence that various troubles such as soaring trade deficits, jittery financial markets and a slumping housing market in the United States will not be enough to derail growth.
The G-7 finance officials pledged to resist growing protectionist pressures in their countries, which are being spawned by soaring trade imbalances such as the fifth consecutive year of record trade gaps in the United States.
They pledged to make structural reforms in their own economies to reduce the yawning trade gaps and urged China to do more to introduce flexibility into its currency system, which American manufacturers believe is necessary to curb China's huge trade surpluses.
"We remain aware of the risks to the world economy," U.S. Treasury Secretary Henry Paulson said in comments to reporters after the meetings. "Fuel prices remain high and volatile. Protectionist pressures are rising. Global financial markets are vulnerable to reversals, as we saw earlier this year."
The discussions, which were led by Paulson and Federal Reserve Chairman Ben Bernanke, the head of the U.S. central bank, took place in advance of weekend meetings of the 185-nation International Monetary Fund and World Bank.
All of the talks were being overshadowed by controversy over World Bank President Paul Wolfowitz and his involvement in a huge pay raise awarded to a close female friend.
Asked about the controversy surrounding Wolfowitz, Paulson called him a "very dedicated public servant" and said he believed the review process under way by the World Bank's 24-member board of directors should be allowed to proceed.
The finance discussions were occurring at a time when the global economy, according to the IMF's new forecast, is expected to grow at a sizzling pace of 4.9 percent both this year and in 2008.
Growth in the United States, the world's largest economy, is projected to slow to just 2.2 percent this year, the weakest showing since 2002, when the country was pulling out of a recession.
IMF economists warned that the prospects for global growth could be derailed if the slowdown in the United States becomes more severe or if other potential threats such as another spike in global oil prices or further financial market instability should occur.
But French Finance Minister Thierry Breton said he believed the U.S. slowdown wold have "a limited impact" on other countries with the possible exception of U.S. neighbors Canada and Mexico. He said Bernanke gave a "reassuring" presentation to the group on U.S. economic prospects.
In late February, stock markets around the world were rattled when investors became worried that rising mortgage delinquencies in the United States could worsen the U.S. housing slump.
But even with the stomach-churning declines on Wall Street and other markets this year, Paulson noted that "the system has proved to be resilient and adjustments orderly."
After the discussions with the G-7 countries, the finance officials broadened their talks over dinner Friday night when they were joined by finance officials from China and Russia and the big oil-exporting countries of Saudi Arabia and the United Arab Emirates
The Chinese delegation, perhaps miffed by the continued G-7 pressure on reforming its currency system, did not send its finance minister and central bank chief to Friday's talks, dispatching deputies instead.
David Dodge, head of Canada's central bank, said that the G-7 planned to continue to do "what we have been doing, which is to talk to the Chinese leadership" about the need for more currency flexibility.
Deputy finance ministers from the G-7 countries were scheduled to meet on Sunday with representatives of leading hedge funds, the loosely regulated pools of capital favored by some wealthy people.
German Deputy Finance Minister Thomas Mirow told reporters that the issue of hedge funds had been discussed intensively during the G-7 talks Friday. Canadian Finance Minister Jim Flaherty said that on hedge funds "some advocate, as Germany does, a more active regulation ... and some advocate a more direct market-based approach." The United States is one of the countries opposed to increased regulation.
German Chancellor Angela Merkel wants to include the issue of hedge funds on the agenda for this year's leaders summit of G-8 countries taking place in Heiligendamm, Germany, in June. The G-8 includes the G-7 countries and Russia.


Updated : 2021-10-23 06:15 GMT+08:00