Henry,
Will be interesting to see how Rubin's concerns play out...?
Rubin: Global Economic Risks Remain
By MARTIN CRUTSINGER
.c The Associated Press
WASHINGTON (AP) -- One day after the United States failed to achieve solid commitments from Europe and Japan to boost growth, Treasury Secretary Robert Rubin used his bluntest language yet to warn that the world could face severe risks if major countries do not carry out their responsibilities.
Rubin noted that America's trade deficit has soared to record levels as a result of nearly two years of global turmoil while Japan's trade surplus has actually increased and Europe's trade balance has been essentially unchanged.
''The United States has borne the bulk of the burden of the global current-account adjustment in response to the Asian crisis,'' Rubin said.
''This situation cannot continue indefinitely. Japan and Europe must boost domestic demand-led growth,'' Rubin said in a speech at the opening of discussions among world finance ministers who sit on the steering committee for the 182-nation International Monetary Fund.
Noting that economic growth has flagged in Europe in recent months, Rubin said, ''It is important that Europe redouble its efforts to increase domestic demand-led growth.''
And for Japan, which is mired in its worst recession in 50 years, Rubin was even more blunt, saying that growth prospects and the threat of deflation ''remain a source for concern.''
With the United States the only region of the world exhibiting strong growth, Rubin said, ''The balance of risks for the global economy remain on the downside.''
Rubin's comments highlighted growing unease within the administration about the need for America's major allies to do much more to boost growth to serve as an alternative market for exports by crisis-stricken countries.
While the overall U.S. economy is doing well with unemployment at a three-decade low, America's trade deficit hit a record $169 billion last year, and is projected to rise even further in 1999. More than 300,000 manufacturing jobs have been lost and American farmers, who export one-third of their production, are suffering their worst times in a decade.
After several hours of closed-door discussions Monday, the world's seven richest countries -- the United States, Japan, Germany, France, Britain, Italy and Canada -- issued an eight-page statement pledging to pursue a growth strategy that will reduce growing trade imbalances.
They also pledged to bolster recoveries from recessions in countries whose economies have been leveled by the currency crisis, but they notably did not specify how they will achieve these goals of greater growth.
Canadian Finance Minister Paul Martin expressed concerns, saying that the global recovery remains too fragile to provide ''any grounds for complacency.''
But underscoring the private disagreements among the major powers, Japanese Finance Minister Kiichi Miyazawa, a former prime minister of Japan, immediately sought to play down expectations that the G-7 statement signaled that Japan was willing to do any more than it already has to jump-start its ailing economy.
While the statement referred to Japan ''using all available tools to support strong domestic demand-led growth,'' Miyazawa said that meant only that Japan should ''do its best,'' not that Japan should ''do something new.''
The eight-page G-7 communique touched on a number of issues facing the global economy, including the need for countries devastated by a steep plunge in currency values and ensuing recessions to continue efforts to overhaul weak banking systems and deal with other economic problems, all topics that were being reviewed today in the broader IMF meetings.
The IMF on Sunday approved a major U.S. initiative to change the way the fund makes loans that will allow it to provide billions of dollars in support to countries that are pursuing sound policies before they are hit by financial turbulence.
The new contingency line of credits will allow nations to use IMF reserves to bolster their own resources to fend off attacks by currency speculators.
IMF officials were also in negotiations with Russia, one of the victims of the turmoil, and Russian Finance Minister Mikhail Zadornov told reporters Monday that he had a ''good feeling'' the IMF would soon agree to resume lending to his country. Russia has said it needs at least $4.5 billion in loans this year just to meet past commitments to the IMF.
AP-NY-04-27-99 1037EDT |
