There were some tensions bubbling under the surface when the finance ministers of the seven big industrial states (G7) met in Rome over the weekend. True, the ministers were able to smooth things over by pointing out - rather self-evidently - that the US, Japan and Europe all had a part to play if the world economy was to return to a stronger rate of growth. However, it is clear that the US believes that Europe, in particular, should be doing more to boost growth.
Mr Paul O'Neill, the US treasury secretary, pointedly observed before the meeting that, along with the US, Europe and Japan "need to play a locomotive role as well". The US has led the way in recent times, recording successive years of strong growth - a trend only broken late last year and this year. Euro zone growth has been less impressive, although at around 2 to 2.5 per cent this year, it will outpace the expected US rate of about 1.5 per cent. Japan, meanwhile, remains mired in recession with little prospect of an early return to strong growth.
The US treasury secretary did strike one hopeful note. He said that the treasury expected US growth to be running at an annualised rate of 2 per cent by the end of this year and to average 3 per cent next year. This upbeat assessment is probably based on signs of reasonable levels of consumer confidence in the US, together with an expected boost to business from lower interest rates.
Unfortunately, such a recovery cannot be taken for granted. Many areas of US industry remain in the doldrums. . Lower interest rates and a cut in income tax may help, but the prospects for an early US recovery remain very much in the balance.
Against this background, the outlook for the euro zone also remains clouded. Growth in Germany, its biggest economy, has slipped sharply and there are emerging signs of weakness in France. While the relatively high level of euro zone inflation - 3.4 per cent in May - is higher than the European Central Bank would like to see, this emerging picture of economic weakness provides a strong case for a further interest rate cut by the ECB. It should cut rates again soon.
The other implication of lower growth for the euro zone is pressure on national budgets. European finance ministers will discuss budgetary planning and co-ordination at a meeting in Brussels tomorrow. They are striving to achieve a difficult balance between recognising national sovereignty and achieving necessary co-ordination and monitoring. If growth slows further, tensions between member states and the EU Commission may well rise.
The Irish economy cannot remain immune, as was evident from the recent half-year Exchequer figures, which showed a shortfall in tax receipts. This presents a challenge to the Minister for Finance, Mr McCreevy, and his Cabinet colleagues as they begin to discuss the 2002 Budget. Unless they manage to get a much tighter grip on Exchequer spending, the amount left for tax reductions next year is likely to be substantially less than was included in any of the earlier Budgets delivered by this Government.