Group of 7 Vows to Help World Economy Grow

With economic troubles spreading through the three biggest English-speaking countries, finance officials from the United States and other industrial powers pledged Saturday to be “vigilant” in promoting expansion.

“We all agreed that growth in all our economies is crucial to global prosperity,” Treasury Secretary Paul H. O’Neill told reporters after the meeting. Emphasizing the personal rapport among the officials from the Group of 7 industrial countries, O’Neill said “there was a sense of real optimism” on the part of every participant in the talks.

However, none of the seven countries--the United States, Japan, Germany, France, Britain, Italy and Canada--offered any new policies. The three continental European countries, determined not to foster inflation at home, did not offer to reduce interest rates in the name of promoting global economic growth.

The representatives of the world’s economic powers met in the absence of violent street protests that marked their sessions of a year ago. But this year the world economy is a bigger concern: The International Monetary Fund predicts global economic growth in 2001 of 3.2%, down from 4.8% last year.

The G-7’s post-meeting statement, though bland in its wording, was clear in the intent of the message: that all the countries should make efforts to promote internal growth while being careful to guard against a resurgence of inflation. The statement talked about “maintaining price stability” in the U.S. and “meeting inflation targets” in Canada and Britain.

The United States, as the world’s largest economy, has generated the most global concern. Although the government reported Friday that the U.S. economy grew at an annual rate of 2% in the first three months of this year--double the rate at the end of last year--many economists and business leaders still feel the U.S. economy may be balancing on the edge of recession.

Despite that, the G-7’s post-meeting statement took an upbeat tone. “Long-term economic fundamentals--productivity gains and . . . market flexibility--remain strong” in the U.S., it said.

O’Neill said Federal Reserve Chairman Alan Greenspan, who also represented the United States in Saturday’s meeting, has presided over a 2-percentage-point reduction in interest rates this year to keep the economy on track. And as for fiscal policy, O’Neill predicted, “I’m very hopeful we are going to see final action on tax reform by the first of June.”

Congress almost certainly will not meet that ambitious schedule. But O’Neill and other administration officials are confident they will get action this year on a major tax cut that will help forestall a recession.

In Japan, where prices are falling and the economy is mired in recession, the G-7 said the central bank should “continue to provide ample liquidity.”

O’Neill said he was impressed by the “vigorous” presentation by Japan’s new finance minister, Masajuro Shiokawa, about the economic policies that will be pursued by the government of Prime Minister Junichiro Koizumi. The Koizumi administration took power last week, promising to lead Japan out of its decade-long economic downturn.

O’Neill and Fed Chairman Greenspan had a private meeting with Shiokawa in addition to their discussions during the session.

The G-7 officials also conferred with government officials from Russia and urged steps to help Russia function more effectively in the global economy.

“Russia needs to take steps to create an economic environment conducive to investment, both foreign and domestic, such as enforcing the rule of law, promoting the free flow of information, attacking nonpayments and barter, strengthening the banking system and improving corporate governance,” the G-7’s statement said.

The G-7 leaders met two days before the formal opening of the annual spring meetings of the International Monetary Fund and the World Bank, whose sessions last spring drew thousands of demonstrators to Washington who protested the effect of economic globalization on the world’s poor countries.

This year, by contrast, few protesters are in Washington. Their chief target this spring was the Summit of the Americas a week ago in Quebec, where the leaders of 34 Western Hemisphere nations pledged to work toward establishing a free-trade zone covering the entire length of the hemisphere.

At least 46 police officers and 57 demonstrators were injured as protesters set fires, broke windows and threw stones at police, who fought back with massive amounts of tear gas. There were more than 400 arrests in Quebec.

Few of the anti-globalization forces have come to Washington to press their point that global capitalism is visiting low-wage work and environmental degradation on countries without the manufacturing base to compete with rich countries.

Police closed several streets around the World Bank and IMF headquarters.