A Troubled Clinton, His Ratings, Currency Down, Leaves Today for 2nd G-7 Summit : Economies: President’s image among other leaders is now mixed. Many facing sticky problems at home.

Just a year ago, an increasingly popular President Clinton was heading for his first economic summit in Tokyo, where he showed the world a flattering new side of a leader who had been focusing on domestic issues.

How things change.

Today, Clinton departs for his second economic summit, this one in Naples, Italy, starting Friday, with his roller-coaster standing in opinion polls on the downward slope and his currency scraping a rocky bottom. Last year’s new guy in the Group of Seven major industrial nations, to whom the other six looked for leadership, is now just one of the gang, struggling with political problems at home.

With his six partners, Clinton’s image is mixed. One senior Western diplomat whose country will be represented at Naples said Clinton’s problem at home and abroad is simple: “He hasn’t delivered.”

“Admired? Respected? Yes. But there’s an impotence” about his presidency, the diplomat said.

This view of Clinton is not universal. “If you look back at the economic agenda, he comes as someone who can deliver,” said Henning Christophersen, the European Union’s commissioner for financial affairs. “The U.S. has non-inflationary growth; the U.S. has a much better job-creation record than Europe.”

It is against such an uncertain backdrop that Clinton will meet with the leaders of Britain, Canada, France, Germany, Italy and Japan. During their final session Sunday they will be joined by Russian President Boris N. Yeltsin.

None can claim an overwhelming mandate at home, although Prime Ministers Jean Chretien of Canada and Silvio Berlusconi of Italy, newly chosen, have not yet been subject to the sniping with which many of the others must deal. “The tragedy is, this is not a summit that has any leaders,” said Stephan Richter, president of TransAtlantic Futures, an economic consulting firm.

The eight-day overseas trip--the fifth of his presidency--will also take Clinton to Poland and Latvia before the summit and to Germany after it. In each place he will try to offer reassurance that America will maintain its political and economic commitments amid a splintered world order.

The image of the first visit by a U.S. President to Latvia, one of the three freedom-seeking Baltic countries that had been part of the Soviet Union since World War II, may prove stirring. And Clinton’s planned speech against the backdrop of Berlin’s Brandenburg Gate is likely to be dramatic.

But while the White House is hoping the trip will rack up political points at home, the goal may prove more elusive than on the earlier trips. Foreign policy is now rated in most polls as Clinton’s weak point, trailing his overall approval rating by a large margin.

Although Clinton’s overseas appearances have brought him generally favorable publicity, they have done little to budge opinion. He got no more than the slightest bounce in the polls from his well-received speech at the June 6 D-day commemoration.

What sets this economic summit apart from the 19 previous annual meetings is the unusual economic situation in the leading industrialized democracies. In the past, such issues as economic growth, unemployment, inflation and interest rates have dominated the agenda.

Such is not the case in 1994. Washington is no longer beating up on Germany to reduce interest rates to propel faster economic growth. While the Clinton Administration would like Japan to do more to boost its growth rate, the outlook there is for the current, rare recession to give way to moderate economic growth later this year.

If U.S. interest rates set by the Federal Reserve are edging upward, they are not doing so at a pace that frightens political leaders. Inflation remains largely in check.

“It’s not a bad picture,” said Robert D. Hormats, a vice president of the investment firm of Goldman, Sachs International and a former Treasury and State Department official.

Administration officials have portrayed the agenda as more of the same. “The strategy we put in place last year is working,” Treasury Secretary Lloyd Bentsen said: The U.S. budget deficit has been cut, European interest rates are falling, and there are signs that the Japanese economy is beginning to grow.

The four European nations that will be represented at Naples recognize that they cannot criticize the U.S. economy at a time when the European unemployment rate--an astonishing 12%--is about double the U.S. rate.

Nor can they complain about America’s failure to take decisive action to solve the civil war in Bosnia or rescue Russia’s faltering economy--issues on which Western Europe has fared no better.

“It isn’t fair to criticize the United States, because the Europeans have been even less prepared to deliver than the U.S.,” said Christophersen, the EU’s financial affairs commissioner.

There is, however, one U.S.-related problem on the informal agenda: the beleaguered dollar. Since the beginning of the year it has lost roughly 11% of its value in relation to the Japanese yen and has fallen against most European currencies as well.

This development makes U.S. goods cheaper overseas, to the benefit of U.S. manufacturers, and adds the equivalent of an 11% tax on Japanese goods sold here. But it also makes foreign investment in the United States less attractive because, with the dollar falling, it takes an ever-greater return just to stay even when earnings are converted into other currencies.

The dollar’s troubles place the G-7 partners in a difficult position. The group is limited in the steps it can take to shore up the dollar, short of a significant increase in U.S. interest rates that would make investments here more attractive but risk stifling growth.

The Europeans, who regard the dollar as weak mostly against the yen and mostly as a result of the U.S. trade deficit with Japan, are not particularly eager to do anything at Naples.

But Hormats, the Goldman Sachs executive, said the G-7 leaders cannot duck the issue. If they do not deliver a program that looks able to stabilize the currency, he said, “the markets will be disappointed and set off a new round of volatility.”

The problems with the U.S. currency present a dilemma for Clinton. In the view of many experts, the U.S. economy is fundamentally sound; there is no good economic reason for the dollar’s decline. Rather, it is a general international uncertainty about Clinton’s leadership, both in economic matters and in foreign policy, that is contributing to the dollar’s plight.

“The dollar is an embarrassment to the President,” said Rudiger Dornbusch, an economist at Massachusetts Institute of Technology. “Clinton’s total lack of leadership plays into it very strongly. It’s not very often a President comes to the summit with his currency in the emergency ward. It reflects very poorly on him. If he wanted to project a strong leadership image for the United States, who would believe it?”

Investors see the U.S. economy slowing from its strong post-recession growth. While economic conditions have strengthened overseas, there is “a lack of confidence here,” said Olin Wethington, a former assistant secretary of the treasury for international affairs.

“Clinton’s got to be worried, thinking, ‘Am I going to be sitting there and see the dollar hit a new post-World War II low? What does that say about the credibility of my leadership?’ ” Wethington said.

One chronic problem that just a few weeks ago seemed solvable--the stubborn trade deficit with Japan--has in recent days turned cloudy. Officials had hoped that a new round of negotiations with Japan would allow them to announce some progress.

But Japanese Prime Minister Tsutomu Hata’s governing coalition fell apart. He was replaced by Tomiichi Murayama, a Socialist, and the new government is considered unlikely to make the reductions in government support for farmers, retailers and industry required to achieve significant progress in trade negotiations.

On another front, Yeltsin’s presence at the meeting will renew an old question for the Group of Seven: When will it become the Group of Eight? Moscow has been pressing for such an expansion, but others point to Russia’s serious economic woes and say it is far from earning the sort of status as an economic giant that would let it join the club.

While the G-7 nations account for roughly 11% of the world’s population, their economies are valued at 70% of the world’s gross domestic product. Russia is not in the same league.

Prices continue to surge in Russia, government revenue may be as much as 30% below anticipated levels, unemployment is at least 8%, and crime is interwoven throughout the economy “like a ganglion,” said Robert Legvold of Columbia University.

So, there is little expectation that Yeltsin will come away even with the promises of support that were given to Russia in 1993, when the international community pledged roughly $44 billion in aid.

Times staff writer Tyler Marshall in Brussels contributed to this report.