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19 May 2024

G7 finance chiefs gather amid global economic gloom

By Agencies


Finance ministers from the Group of Seven richest nations met on Saturday to discuss faltering economic growth and a credit crunch that has rocked world markets and prompted gloom over the global economy.


The top officials from Britain, Canada, France, Germany, Italy, Japan and the United States are expected to discuss measures to boost global market transparency and surveillance in light of recent financial turmoil.


The G7 will "send a strong message for the sake of the stability of the financial market as well as (the) global market," Japanese Finance Minister Fukushiro Nukaga (pictrued above, right) told reporters.


The ministers gathered for a working lunch in central Tokyo ahead of the main meeting which was due to start at 0545 GMT.


But analysts say that coordinated remedial action by the G7 powers to try to bolster their economies or stock markets seems unlikely.


Despite growing fears that the US economy is slipping into recession, they will likely reassure markets that their economies are fundamentally sound despite the fallout from a US housing slump and a related credit squeeze.


"I still believe that we are going to continue to grow, although it is a slower pace for a while," US Treasury Secretary Henry Paulson (pictured above, left) said in an interview with Japanese broadcaster NHK ahead of the one-day meeting.


"We are doing everything we can to bolster our economy this year," he said, referring to a package worth up to $150 billion (Dh548 billion) to stimulate the sagging US economy as well as interest rate cuts by the Federal Reserve.


Analysts say other G7 members have more limited room for measures to stimulate demand, particularly Japan, the world's second-largest economy, which has huge national debts and interest rates of just 0.5 per cent.


On Saturday, friction emerged over the weakness of the dollar and the yen against the euro, which acts as a brake on European exports.


The euro is "still probably at a high level", even after the recent drop below $1.45 (Dh5.30), said French Finance Minister Christine Lagarde.


But France has "not much hope" that any currencies other than the Chinese yuan will be mentioned in the official G7 statement, she added.


At past meetings G7 members have urged China to allow a faster appreciation of the yuan.


There may be calls behind closed doors from European ministers for action to try to stem the dollar's decline, analysts said.


But publicly the G7 is unlikely to shift from its previous official stance that foreign exchange rates should reflect economic fundamentals and that excess volatility is undesirable, they added.


"The problems and uncertainty in global markets resulting from (the) US subprime crisis and the policy responses will likely be the key issues and although we think foreign exchange is likely to be discussed we expect no major changes in the policy in the communique," said ABN Amro analyst Melinda Smith.


Finance ministers from China, Indonesia, South Korea and Russia have also been invited to join the "outreach" dinner that the G7 now regularly organises on the sidelines of its gatherings.


The role of ratings agencies, which have been criticised for not flagging up the impending global credit woes, is also expected to be discussed by the G7, along with efforts to tackle climate change. (AFP)