G7: Turnaround ahead?
Finance ministers say economic comeback may come soon
July 7, 2001: 1:10 p.m. ET
ROME (Reuters) - The Group of Seven economic powers put frayed nerves aside on Saturday to issue a cautiously upbeat message on the prospects for pulling through the current global downturn.
G7 finance ministers said after talks in Rome that it was up to the major economic zones -- North America, Europe and Japan -- to play their part to boost world growth, despite overt tensions over how the responsibility would be shared out.
"We all agreed that growth in each of our economies is crucial to prosperity around the world," U.S. Treasury Secretary Paul O'Neill said.
O'Neill said the U.S. economy, stalled since the latter half of 2000, could return to a more robust annual two percent rate of expansion by the end of this year and even three percent going into next year.
"Our view is that the U.S. economy will return to a real rate of growth of over two percent (a year) in the fourth quarter of this year," O'Neill told reporters after the meeting in a 16th century villa high above Rome. "And our expectation is that next year we will grow at a rate of something over three percent."
A Gloss on Tensions
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 we might have had a difference of opinion...the differences disappear when we get closer," O'Neill said of his second official trip to Europe since President George W. Bush's Republican team took office in January.
U.S. urgings for Europe and Japan to do more about the woes of the world prompted a blunt riposte on the eve of the talks from French Finance Minister Laurent Fabius, who said the main cause of the slowdown was the U.S. downturn, along with high oil prices.
Fabius was backed up by German Finance Minister Hans Eichel on Saturday. But Fabius too looked placated by the sunsoaked "dolce vita" atmosphere at the Villa Madama on Saturday as he avoided further reference to the pre-G7 skirmishing.
"The word today from all my colleagues was 'cooperation' -- and not blaming each other," he said. "The idea was that everyone must do their bit, with close coordination. This idea was accepted and highlighted by all."
A Coordinated Line
There was no official communique of the kind often published after such gatherings as the ministers came to Rome to pave the way for a summit of G7 leaders in Genoa on July 20-22.
But the finance ministers aimed to communicate a coordinated line. Italy, host and current G7 president, printed up remarks for ministers to use to brief the press.
"While the global economy has slowed down more than expected over the past year, continued sound economic fundamentals and strong international cooperation should provide a solid foundation for renewed expansion," the document said.
Several ministers highlighted worries over damage to the world economy from high world oil prices.
Italian Economy Minister Giulio Tremonti, hosting his first G7 talks since Prime Minister Silvio Berlusconi's center-right government took over, and Eichel highlighted O'Neill's comments in the meeting on the prospects for a U.S. economic pick-up toward the end of this year.
U.S. growth is expected to come in at around 1.2 percent this year, compared to five percent in 2000. Tremonti said he was cautiously optimistic over the prospects for Europe, where growth in 2001 is expected to be more rapid than in the United States.
"There is cautious optimism in Europe as far as economic growth prospects are concerned. There are some signs of positive development," Tremonti told reporters in a post-meeting news conference.
Japan weak 'for a while'
Japan was exhorted yet again by its partners to push through structural economic reforms such as deregulation and to fight against deflation in a country currently fighting with total economic stagnation.
But Japanese Finance Minister Masajuro Shiokawa said Japan's economic upturn was likely to remain weak "for a while."
Japan has effectively declared its economy in a technical recession by forecasting a weaker tone in the April-June quarter than the 0.2 percent contraction in the previous quarter.
O'Neill traveled to Rome convinced U.S. tax and interest rate cuts, aimed at averting a full-blown recession in the world's largest economy, had not been matched by aggressive growth-boosting policies from all his G7 partners.
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