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Nations pledge to fire up sluggish global economy
The world's seven largest industrial countries jointly pledged Saturday to promote growth in a stagnant global economy hurt by the Sept. 11 terrorist attacks and to crack down harder on financing of terrorist groups.
Finance ministers and central bankers from the Group of Seven nations put up a united front to assure the world they were set to fight off a possible world recession and to do everything they can to stamp out "the scourge of terrorism."
"We stand united in our commitment to vigorously track down and intercept the assets of terrorists and to pursue the individuals and countries suspected of financing terrorists," their communique said.
They did not mention the word "recession" in their communique or during a joint press conference following their six-hour meeting, but it clearly was on their minds as they committed themselves to "bringing forward needed measures to increase economic growth and preserve the health of our financial markets."
Treasury Secretary Paul O'Neill said the pledge essentially meant that the U.S., Canada, Great Britain, Italy, Japan, France and Germany had promised to work together to push economic growth, but each would do so in its own way. He said the U.S., with its lower interest rates, new spending increases and pending tax cuts, had already responded with "correct actions."
The joint statement signaled that Europe also may be ready to contribute more actively toward boosting world growth, with the remedy most often mentioned being a further reduction in interest rates by the European Central Bank.
In Europe, said French Finance Minister Laurent Fabius, there is "still a lot of margin for action" to stimulate the economy. Fabius favors the European Central Bank lowering interest rates to spur growth in Europe. German Finance Minister Hans Eichel said the finance chiefs were "firmly committed that terrorism will not derail us" in keeping the economy stable.
"Notwithstanding remaining short-term uncertainties, we are confident about our future prospects," the group said in its communique.
However Kathleen Stephansen, international economist at Credit Suisse First Boston, said in an interview that a "major crisis of confidence" has swept over the global economy in the wake of the attacks.
She said a U.S. recession and the worst global stagnation in 50 years are on the horizon. America, long viewed as the engine of the global economy, has lost some of its old economic pulling power, she said.
Other regions, notably Europe, are going to have to pitch in, Stephansen said. This will mean that the European Central Bank will have to lower interest rates more, she said.
The European Central Bank, unlike the Federal Reserve in the U.S., "has been much too laggard," said Gary Hufbauer, economist at the Institute for International Economics in Washington.
Europe, though, isn't much of a locomotive, either, Hufbauer said, stressing how difficult it will be for the world to shake off the doldrums. Europe's countries in general lack the budget surpluses the U.S. had going into the downturn, he said. Also, they have agreed as part of their economic unity to keep deficits under 3 percent of annual economic growth.
The Japanese, caught in a long downturn, can do little to bolster world growth, said Bowman Cutter, managing director of Warburg-Pincus Venture Capital and a former Clinton administration economist.
But Japan's finance minister, Masajuro Shiokawa, told reporters "it is worth stressing that the fundamentals of the world economy are sound."
The ministers issued an action plan designed to clamp down on the financing of terrorist organizations and block their assets, and scheduled a special meeting on the topic on Oct. 29 and 30 in Washington.
They called for greater mutual cooperation to block the assets of terrorist groups, share lists of terrorists and educate financial institutions on practices associated with terrorist financing.
They challenged other countries to join them in cracking down on terrorist financing and said they would implement United Nations sanctions to freeze terrorist assets.
"There should be no safe hiding place for terrorists and for the financing of terrorism any place in the world," said Gordon Brown, Britain's chancellor of the exchequer.