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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (158938)	7/8/2001 1:37:06 AM
From: calgal	Read Replies (1) \| Respond to of 769670

07/07 16:56 G-7 Ministers See U.S. Leading World Economic Rebound (Update3) By Michael McKee Rome, July 7 (Bloomberg) -- The Group of Seven industrial nations said they expect the U.S. will lead a rebound in world economic growth after six interest rate reductions and $1.35 trillion in tax cuts. U.S. Treasury Secretary Paul O'Neill said he told his counterparts that the world's largest economy will expand at an annualized rate of more than 2 percent in the fourth quarter of this year and greater than 3 percent next year. ``This would be good news for all of us,'' said Hans Eichel, Germany's finance minister. ``No world region can decouple from the other and steer its own course.'' The U.S. accounts for about one-quarter of the world's economy. With global growth expected to halve to 2 percent this year, according to the Organization for Economic Cooperation and Development, officials from Europe, Canada and Japan are pinning their hopes on the U.S. ``Europe's economy depends in part on the U.S.,'' said Italian Finance Minister Giulio Tremonti. When G-7 ministers last met, in April, European officials said they would withstand a slowing world economy. Since then, the German government has said its economy may not have grown at all last quarter. The European Central Bank has reduced borrowing costs once and the continent's governments have said they will not accelerate planned tax cuts. World Economy ``The U.S. is still seen as the growth engine of last resort,'' said Lara Rhame, foreign exchange economist at Brown Brothers Harriman & Co. in New York. ``They agreed the U.S. is still the only ship afloat and it will have to keep the world sailing straight.'' The G-7 didn't discuss currencies. The ministers didn't release a statement on the global economy. The euro has declined 10.1 percent against the dollar this year as investors expect faster growth in the U.S. than in Europe by the fourth quarter. The yen has dropped 9.1 percent. The U.S., which grew at an annual rate of 1.2 percent in the first quarter -- down from 5 percent a year earlier -- will probably be growing at a 2.9 percent annual pace by the fourth quarter, economists surveyed by Bloomberg News said. ``Obviously, we are impacted by what happens south of the border, so therefore I was happy to hear the U.S. Treasury Secretary say that all the fundamentals are there for a turnaround in the fourth quarter,'' Canadian Finance Minister Paul Martin said. European Growth Coming into today's meeting, U.S. and U.K. officials in particular said Europe and Japan should do more. The two ``need to play a locomotive role as well,'' O'Neill said before leaving for Rome. Japan is in its fourth recession in a decade. Europe's annual rate of economic growth will drop to 1.9 percent in the third quarter, according to economists surveyed by Bloomberg News last week. That's down from an estimated 2.5 percent in second quarter. ``Growth will be significantly lower than expected,'' said Belgian Finance Minister Didier Reynders, who attended the meeting as head of the group of finance ministers from the 12 countries that share the euro. The Fed has reduced the overnight lending rate at every policy meeting this year -- and twice in between -- to 3.75 percent from 6.5 percent at the start of the year. The Bank of England has pared its base rate three times this year to 5.25 percent. The ECB lowered its benchmark rate a quarter-point to 4.5 percent in May and has said it won't rush to trim borrowing costs again. The central bank's mandate is to control inflation, and consumer prices have been above the bank's 2 percent ceiling for a year. Prices rose at a 3.4 percent annual pace in May, the biggest increase since the euro's 1999 debut. Germany, Japan Growth in Germany, Europe's largest economy, is seen falling by most analysts to below 2 percent this year, from 3 percent in 2000. Opposition politicians and some analysts have called for Germany to accelerate tax reductions planned for 2003 and 2005. Chancellor Gerhard Schroeder has refused, arguing it would harm efforts to lower the country's budget deficit. Eichel said earlier today there would be no new government spending or tax reductions in Germany. ``Budget policy has done its part. Everything else leads to nothing but more government debt,'' he said. Health Fund While the Bank of Japan is holding interest rates near zero, officials have refused to increase the money supply to stimulate growth until they see evidence the government of new Japanese Prime Minister Junichiro Koizumi is carrying out promised reforms. Koizumi has outlined plans to make Japanese banks write off $13 trillion yen ($104 billion) in bad loans, restructure the economy, and cut back on wasteful public spending. He won't offer details until after elections for the upper house of parliament later this month. Shiokawa briefed O'Neill today. ``I got very clear assurances of the intent of Mr. Koizumi to follow through on the reforms,'' O'Neill said after the meeting. ``The reforms could start being implemented as soon as September.'' At their meeting, the G-7 ministers said they expect agreement by the end of the month on a $1.5 billion fund to fight AIDS, tuberculosis, malaria, and other diseases. They also announced the Organization for Economic Cooperation and Development would push back a deadline for imposing sanctions on offshore tax havens until Nov. 30. The G-7 includes the U.S., U.K., Canada, Germany, France, Italy, and Japan. quote.bloomberg.com