G7 summit opens as gloom dogs markets

 

Sinking stock markets and a sagging dollar provided a sobering backdrop for leaders of the world economy as they headed for Canada yesterday.

Group of Seven finance ministers meet for two days in Halifax, Nova Scotia, and are expected to express confidence in global economic recovery, as well as look at Argentina, terror financing and easing the debts of poorer neighbours .

A modest number of protesters are planning to demonstrate against world capitalism - a common event on the sidelines of recent international meetings.

But police manning waist-high barricades at the summit site had little to do but direct traffic as the city got ready for the visitors, who faced the distraction of an abundance of bars, beer and lobster burgers.

Sceptical investors have brushed aside official optimism that the world economic rebound was safely on track, selling off stocks and forcing the mighty US currency to 17-month lows in recent days.

Exchange rates are not on any official agenda and summit host Mr John Manley, Canada's new finance minister, said he expected it to stay that way.

"Certainly we wouldn't want to encourage volatility in exchange rates.

"I think that we would want to encourage sound economic policies and let markets determine rates," he said.

Other topics to be discussed at the G7 meeting will be the situation in Argentina - mired in recession and battling to win a loan from the International Monetary Fund - and how it might affect Brazil and other Latin American nations.

The G7 consists of Britain, Canada, France, Italy, Germany, Japan and the United States. European Commissioner for Monetary Affairs Mr Pedro Solbes and the Spanish Economy Minister Mr Rodrigo Rato will also attend some parts of the meeting to represent the EU, as will Russian Finance Minister Mr Alexei Kudrin.

A senior Canadian official has said the focus is more likely to be on the medium-term prospects for economies.

In particular, Mr John Taylor, international under-secretary at the US Treasury, has indicated that the need for Japanese structural reform to exit its deflationary rut is likely to get another airing.