Finance ministers from the world's richest nations have expressed optimism that prospects for continued global growth remain good despite economic troubles inthe United States and Japan.
"The basic factors that have supported sustained growth in many of the major industrialeconomies remain in place," the Group of Seven said in a joint statement closing today's meeting at the Palazzo die Normanni in Italy.
Specifically addressing the dramatic U.S. slowdown that has raised concerns that the world's largest economy could be slipping into a recession, the ministers urged the United States to useboth interest rate policies and budget policies such as tax cuts to support a rebound in growth.
Both U.S. Treasury Secretary Paul O'Neill and Alan Greenspan, the Federal Reserve chairman,have said that the U.S. economy has ground to almost zero growth. But, following a brace ofhefty interest rate cuts in January, both now believe a revival is in the wings.
The G7 statement recognized that "economic fundamentals remain strong" in the United States.
For Japan, the statement said that a "modest recovery" is expected, but warned that "downside risks remain." They urged the Bank of Japan to pump more cash into the nation's money supplyto stimulate growth.
Japanese Finance Minister Kiichi Miyazawa said afterward that the final wording of the statement had been modified to take into account the Bank of Japan's move Friday to cut its official discount rate.
"The atmosphere was that the G7 understands the BOJ made a decision to do the only thing that it could do, and that they hoped that the economy would respond," Miyazawa said.
However, the explicit reference to monetary policy, rather than the general terms mentioned lastSeptember, suggested that the G7 regarded that as the key tool for more tinkering.
In Europe, "growth prospects remain favorable," due in large part to strong domestic demand inthe 12 European Union nations using the euro single currency, the G7 statement said.
The group recommended continued structural reforms such as loosening rigid labor markets to enhance "growth potential."
Belgian Finance Minister Didier Reynders, representing the euro group nations, said they recognized the dangers of a U.S. slowdown, but insisted Europe was "armed to resist."
"The euro area is now perceived as robust," he said.
With an eye to new uncertainty about oil prices, the final G7 statement noted that "lower energyprices and stable oil markets are important" for sustained growth.
Although oil prices have dropped from near 10-year highs during the latter part of last year, asurprise attack on Iraqi air defense installations Friday and commitments by key oil producers torestrain supply has upset forecasts of more stability in the oil market.
In the statement, ministers and central bankers said exchange rates "should reflect economicfundamentals.
"We continue to monitor developments closely and to cooperate in exchange markets asappropriate," it said.
European officials said Russian authorities invited to the winter meeting in this Mediterraneanport "clearly committed themselves" to accept repayment of its multibillion debt to internationallenders.
Ministers from the seven nations Germany, France, Italy, Britain, the United States, Japan andCanada also reaffirmed their commitment to a debt relief initiative for poor countries, while notingthat a "broader, more ambitious strategy," including further opening of markets to exports fromthe poorest countries, was needed for poverty reduction.
Hundreds of police ringed the one-time fortress turned royal palace where the finance chiefswere meeting to ward off the anti-capitalism violence staged at other recent events.
A few dozen whistle-blowing, drum-beating Italian unionists chanted slogans demanding jobs forthe unemployed, but were kept away from the imposing Palazzo die Normanni itself. AP