G7 to OPEC: cut oil prices
Ministers pledge to protect global
economies amid oil, euro woes
By Staff Writer M. Corey Goldman, with Heather Bourbeau
September 23, 2000: 4:59 p.m. ET
PRAGUE, Czech Republic (CNNfn) - The high price of oil and the low value of
the euro dominated discussions between finance ministers and central bankers
of the Group of Seven industrialized countries on Saturday, with leaders
pledging to prevent either from deterring an otherwise rosy global economic
outlook.
Meeting at the German Embassy in Prague, the G7 -- Canada, France,
Germany, Great Britain, Italy, Japan and the United States - called on oil
producers to return prices to a "level consistent with lasting global economic
prosperity and stability" for both rich and developing countries.
They also noted in their statement
Friday's unprecedented effort among
several of the G7 central banks to
boost the sagging euro, suggesting
the action was taken "because of the
shared concern of Finance Ministers
and Governors about the potential
implications of recent movements in
the euro for the world economy."
"In light of recent developments, we will continue to monitor developments
closely and to cooperate in exchange markets where appropriate," the G7 said.
The European Central Bank, the U.S. Federal Reserve, the Bank of England
and the Bank of Canada all sold U.S. dollars for euros Friday in an effort to
reduce the amount of the currency outstanding and boost its value.
Summers mum on euro
Ministers from the G7 meet once a year during the annual meetings of the
International Monetary Fund and World Bank. They typically discuss the
progress of their respective economies with the IMF and issue a communiqué
to the public with their views on global growth and other issues.
Speaking at the residence of the U.S. ambassador to the Czech Republic
following the G7 meeting, U.S. Treasury Secretary Lawrence Summers
declined to answer reporters' questions about Friday's intervention or the euro.
"I think the G7 statement speaks for itself and I
don't want to add to what it says," Summers said
several times in response to persistent questions
about the level of the euro and whether further
intervention might happen to prop up its value. "I
don't want to go beyond the language in the
communiqué."
The euro closed Friday at 89.92 U.S. cents, up
about 3 percent from its all-time low of 84.42 U.S.
cents on Wednesday though still about 25 percent
below its inaugural price of $1.17 U.S.
The sinking euro and surging oil prices, cited this
week by the IMF as two of the principal risks facing the otherwise rosy global
economy, focused worldwide attention on the G7 meeting in the Czech
Republic's capital.
Summers was also somewhat elusive on the subject of oil prices, less than a
day after President Clinton authorized the release of 30 million barrels of crude
oil from the Strategic Petroleum Reserve, the first time the U.S. has dipped into
its reserves in nine years.
Oil release a "welcome" move
The U.S. and the rest of the G7 "welcomed" the U.S. move, though noted in
their statement that they were "concerned" about the adverse effect of high oil
prices, indicating that "it is important for world oil prices to return to a level
consistent with lasting global economic prosperity and stability for both oil
producing and consuming countries."
"With respect to the action that was taken, it was certainly a constructive step
reflecting a careful attempt to respond to pressures that had gathered in the oil
sector over time," Summers said, indicating that the G7 was also concerned
about actual scarcity of the commodity.
Organization of Petroleum Exporting
Countries' (OPEC) President Ali
Rodriguez said Saturday that the oil
cartel was not seeking a confrontation
with the developed world by restricting
supply as prices simmer at their
highest level in a decade.
Rodriguez, who is also Venezuela's
energy and mines minister, said there was no oil supply shortage in world
markets as consumers in the Northern Hemisphere prepare for winter, and he
welcomed an invitation for talks among OPEC, the European Union and the G7.
"We are not great military or economic powers, but developing countries
seeking to defend our rights over our natural resources," he told journalists
ahead of next week's OPEC summit in Caracas. "It would be grotesque to try
to confront the big world powers. On the contrary, they are our customers."
Upbeat economic outlook
Oil prices fell ended the day Friday at $32.68 per barrel on the New York
Mercantile Exchange, down from their near $35 per barrel level reached earlier
in the week.
As for the world economic outlook,
the G7 statement was fairly upbeat,
noting that "prospects for continued
expansion in industrialized countries
and the world economy more
generally have further improved in
recent months as underlying
fundamentals have strengthened."
The IMF on Tuesday unveiled its
forecast for global economic growth,
predicting that the world economy
will expand by 4.2 percent in 2001.
It warned, however, that high oil
prices could dim its predictions.
For the U.S. and Canada, the G7 issued a solid report card, noting that growth
remained strong, inflation contained and unemployment low. However, the
group cautioned that "fiscal and monetary policies should continue to be
prudent" and pointed out that the U.S. savings should be higher.
For the euro region, the G7 were a little more cautious, stating that Europe
must intensify structural reforms in order to keep growth strong and inflation
contained. Structural reforms refer to the difficulty many of the countries within
the European Union have when it comes to boosting productivity.
Russia: Combat money laundering
Turning to former and current IMF-client countries, the G7 asked Russia to
push through more structural reforms of its own, including improving corporate
governance, enforcement of the rule of law, combating money laundering and
creating an efficient financial sector.
While the seven ministers did not name countries specifically, they
underscored the need for more corporate and financial restructuring in "many
Asian countries" and "policies aimed at reducing vulnerabilities in many Latin
American countries."
While the richest nations were
debating oil and euros, the world's
poorer nations -- including some from
Latin America and Asia -- were putting
the G7 economies under scrutiny.
Finance ministers from developing
countries issued a strongly worded
statement aimed at the world's most
developed nations.
The Group of 24 said the world's major
economies need to become less
protectionist to ensure global
employment growth and poverty reduction.
All the finance ministers, central bank officials and other delegates managed to
meet Saturday with little disruption from protesters. All but one protest
materialized Saturday in Wenceslav's Square in downtown Prague, though the
crowd quickly dispersed. |
