G7 nations are cautiously upbeat

The Group of Seven economic powers have put frayed nerves aside to issue a cautiously upbeat message on the prospects for pulling through the current global downturn.

Finance ministers said after talks in Rome on Saturday that it was up to the major economic zones - Europe, North America and Japan - to play their parts to boost world growth, despite overt tensions over how the responsibility would be shared out.

The US Treasury Secretary, Mr Paul O'Neill, said: "We all agreed that growth in each of our economies is crucial to prosperity around the world."

He said the US economy, stalled since the latter half of 2000, could return to a more robust annual 2 per cent rate of expansion by the end of this year - and reach 3 per cent growth going into 2002.

"Our view is that the US economy will return to a real rate of growth of over 2 per cent [each year] in the fourth quarter of this year," he said after the meeting in a 16th century villa.

"And our expectation is that next year we will grow at a rate of something over 3 per cent."

That, plus similarly hopeful conclusions by other ministers from Japan, Canada, Germany, France, Italy and - to a lesser extent - Britain, put a gloss of cohesion on talks that were preceded by statements pointing out serious disagreement between Washington and Europe.

"In every case where there might have been a difference of opinion . . . the differences disappear when we get closer," Mr O'Neill said. It is his second official trip to Europe since President Bush's Republican team took office in January.

US demands for Europe and Japan to do more about the world's economic woes prompted a blunt riposte on the eve of the talks from the French finance minister, Mr Laurent Fabius, who said the cause of the slowdown was the US downturn, along with high oil prices.

Mr Fabius was supported on Saturday by his German counterpart, Mr Hans Eichel.

Yet Mr Fabius too was placated by the sunsoaked doce vita atmosphere at the Villa Madama as he avoided further reference to pre-G7 skirmishing.

He said: "The word today from my colleagues was `co-operation' - and not blaming each other.

"The idea was that everyone must do their bit, with close co-ordination. This idea was accepted and highlighted by all."

There was no official communique of the kind often issued after such gatherings as the ministers came to Rome to pave the way for a summit of G7 leaders in Genoa on July 20nd-22rd.

But the finance ministers aimed to communicate a co-ordinated line. Italy, host and G7 president, distributed a document for ministers to use in press briefings.

It said: "While the global economy has slowed down more than expected over the past year, continued sound economic fundamentals and strong international co-operation should provide a solid foundation for renewed expansion."

Several ministers highlighted worries over damage to the world economy from high oil prices on the global markets.

The Italian economy minister, Mr Guilio Tremonti, said he was cautiously optimistic on the prospects for growth in Europe, where expansion was expected to be more rapid than in the US.

The US economy is expected to grow by about 1.2 per cent this year, compared to 5 per cent in 2000.

Mr Tremonti said: "There is cautious optimism in Europe as far as economic growth prospects are concerned."

The ministers again urged Japan, which is fighting economic stagnation, to push through structural reforms such as deregulation and to fight against deflation.