Baneblade
2005-04-16, 03:47 PM
G7 Seeks Steps to Cut World Imbalances
19 minutes ago
By Gernot Heller
WASHINGTON (Reuters) - Finance chiefs from the Group of Seven economic powers on Saturday vowed "vigorous" action to reduce global economic imbalances, calling for U.S. budget deficit cuts and reforms in Europe and Japan.
Although the G7 described record oil prices as a "headwind" facing the "robust" global economy, it appeared more concerned about increasingly lopsided international accounts.
China's absence for the first time in three meetings meant little progress was made in addressing Beijing's long-standing fixed currency peg to the dollar -- seen as a key magnifier of potentially destabilizing trade and financial imbalances.
"Vigorous action is needed to address global imbalances and foster growth," said a statement issued after the meeting, referring to global payments gaps like the shortfall in U.S. trade and financial accounts close to 6 percent of national income.
The statement highlighted the need for a lower U.S. budget deficit, for further structural reforms in Europe and Japan and more budget "consolidation" from Tokyo too.
Despite advance lobbying from the United States for the G7 to lean more directly on China over the yuan, the final statement merely repeated a 14-month-old call for more currency flexibility in regions that required it.
China's policy of pegging the yuan to a weakening dollar has been criticized in the United States and elsewhere as tantamount to a subsidy to its already highly competitive exporters. The success of China's strategy has encouraged other Asian countries to follow suit.
Its accumulation of dollars to maintain the peg mean it has banked hundreds of billions of these dollars in U.S. debt securities -- exaggerating payments gaps in the process.
The G7 finance ministers and central bankers said economic growth looked healthy even in the face of costlier energy.
"The global expansion has remained robust, and the outlook continues to point to solid growth for 2005," said the statement.
They said tame inflation, favorable financing conditions and "appropriate" monetary policies in their regions gave reason to hope for continued solid growth.
"But challenges remain. Higher oil prices are a headwind, and the expansion is less balanced than before," the ministers said. "We welcome efforts to improve oil market data, increase medium-term energy supply and efficiency."
STOCK MARKET SWOON
There was palpable concern in financial markets as the G7 members gathered. Economic worries, mainly centered on the impact of higher oil prices, sent the Dow Jones industrial average skidding 191.24 points to end at 10,087.51 on Friday.
Ahead of the meeting, many G7 officials said it seemed the world was going to have to learn how to live with oil prices that may remain persistently high.
The officials from the United States, Britain, France, Germany, Japan, Italy and Canada failed to agree on how to help the world's poorest nations with the issue likely to be put off until a G8 summit -- G7 plus Russia -- in Scotland in July.
British officials want to see a final deal by the Gleneagles summit as Britain, which holds the G7 presidency this year, has declared 2005 a crucial year for Africa.
The G7 sessions preceded spring meetings of the 184-nation International Monetary Fund and its sister lending institution, the World Bank, that began on Saturday and continue on Sunday.
ABSENT FRIENDS
Facing heavy criticism at home, top U.S. officials this week raised the heat on Beijing about the yuan peg. They had been expected to push G7 peers to cite China specifically and urge it to allow the yuan to rise against the dollar.
U.S. Treasury Secretary John Snow kept the focus on China.
After the meeting, he said China has taken many steps over the last few years including preparing for greater flexibility in their exchange rate, introducing foreign exchange market financial products and bolstering banks and bank supervision.
"With this groundwork in place, China is ready now to adopt a more flexible exchange rate," Snow said.
Any U.S. efforts to sharpen the language of the communique to refer more directly to China were unsuccessful.
Japan, for one, felt such a reference may have been counterproductive.
"I believe the Chinese are finding it difficult to make a decision," said Japanese Finance Minister Sadakazu Tanigaki. "Ultimately it should be China's own decision and I hope that they will not make a mistake."
But in post-meeting press briefings, other officials felt freer to highlight that the G7 language was aimed directly at emerging Asia's currency regimes and China's in particular.
European Central Bank chief Jean-Claude Trichet said emerging Asian nations should let their exchange rates move according to economic performance and recommended they let their currencies rise "in an orderly and smooth fashion."
"When the G7 says something, it is certainly something which is important," he said. "We have a permanent dialogue with the emerging countries concerned."
"There is not only one of course," Trichet added.
LINK (http://story.news.yahoo.com/news?tmpl=story&cid=578&u=/nm/20050416/bs_nm/group_dc_18)
19 minutes ago
By Gernot Heller
WASHINGTON (Reuters) - Finance chiefs from the Group of Seven economic powers on Saturday vowed "vigorous" action to reduce global economic imbalances, calling for U.S. budget deficit cuts and reforms in Europe and Japan.
Although the G7 described record oil prices as a "headwind" facing the "robust" global economy, it appeared more concerned about increasingly lopsided international accounts.
China's absence for the first time in three meetings meant little progress was made in addressing Beijing's long-standing fixed currency peg to the dollar -- seen as a key magnifier of potentially destabilizing trade and financial imbalances.
"Vigorous action is needed to address global imbalances and foster growth," said a statement issued after the meeting, referring to global payments gaps like the shortfall in U.S. trade and financial accounts close to 6 percent of national income.
The statement highlighted the need for a lower U.S. budget deficit, for further structural reforms in Europe and Japan and more budget "consolidation" from Tokyo too.
Despite advance lobbying from the United States for the G7 to lean more directly on China over the yuan, the final statement merely repeated a 14-month-old call for more currency flexibility in regions that required it.
China's policy of pegging the yuan to a weakening dollar has been criticized in the United States and elsewhere as tantamount to a subsidy to its already highly competitive exporters. The success of China's strategy has encouraged other Asian countries to follow suit.
Its accumulation of dollars to maintain the peg mean it has banked hundreds of billions of these dollars in U.S. debt securities -- exaggerating payments gaps in the process.
The G7 finance ministers and central bankers said economic growth looked healthy even in the face of costlier energy.
"The global expansion has remained robust, and the outlook continues to point to solid growth for 2005," said the statement.
They said tame inflation, favorable financing conditions and "appropriate" monetary policies in their regions gave reason to hope for continued solid growth.
"But challenges remain. Higher oil prices are a headwind, and the expansion is less balanced than before," the ministers said. "We welcome efforts to improve oil market data, increase medium-term energy supply and efficiency."
STOCK MARKET SWOON
There was palpable concern in financial markets as the G7 members gathered. Economic worries, mainly centered on the impact of higher oil prices, sent the Dow Jones industrial average skidding 191.24 points to end at 10,087.51 on Friday.
Ahead of the meeting, many G7 officials said it seemed the world was going to have to learn how to live with oil prices that may remain persistently high.
The officials from the United States, Britain, France, Germany, Japan, Italy and Canada failed to agree on how to help the world's poorest nations with the issue likely to be put off until a G8 summit -- G7 plus Russia -- in Scotland in July.
British officials want to see a final deal by the Gleneagles summit as Britain, which holds the G7 presidency this year, has declared 2005 a crucial year for Africa.
The G7 sessions preceded spring meetings of the 184-nation International Monetary Fund and its sister lending institution, the World Bank, that began on Saturday and continue on Sunday.
ABSENT FRIENDS
Facing heavy criticism at home, top U.S. officials this week raised the heat on Beijing about the yuan peg. They had been expected to push G7 peers to cite China specifically and urge it to allow the yuan to rise against the dollar.
U.S. Treasury Secretary John Snow kept the focus on China.
After the meeting, he said China has taken many steps over the last few years including preparing for greater flexibility in their exchange rate, introducing foreign exchange market financial products and bolstering banks and bank supervision.
"With this groundwork in place, China is ready now to adopt a more flexible exchange rate," Snow said.
Any U.S. efforts to sharpen the language of the communique to refer more directly to China were unsuccessful.
Japan, for one, felt such a reference may have been counterproductive.
"I believe the Chinese are finding it difficult to make a decision," said Japanese Finance Minister Sadakazu Tanigaki. "Ultimately it should be China's own decision and I hope that they will not make a mistake."
But in post-meeting press briefings, other officials felt freer to highlight that the G7 language was aimed directly at emerging Asia's currency regimes and China's in particular.
European Central Bank chief Jean-Claude Trichet said emerging Asian nations should let their exchange rates move according to economic performance and recommended they let their currencies rise "in an orderly and smooth fashion."
"When the G7 says something, it is certainly something which is important," he said. "We have a permanent dialogue with the emerging countries concerned."
"There is not only one of course," Trichet added.
LINK (http://story.news.yahoo.com/news?tmpl=story&cid=578&u=/nm/20050416/bs_nm/group_dc_18)