To: tsigprofit who wrote (11186 ) 4/9/2003 4:50:31 PM From: Mike M Read Replies (1) | Respond to of 21614 story.news.yahoo.com <<G7 Ministers to Explore Iraq Reconstruction Issues By Glenn Somerville WASHINGTON (Reuters) - Struggling already with a lackluster global recovery, finance chiefs from the world's richest nations begin the prickly process this week of weighing how to rebuild a war-shattered Iraqi economy. U.S. Treasury officials concede the Group of Seven finance ministers don't know the costs, exactly how the effort will be guided, or even what Iraq (news - web sites)'s needs are, but with the war winding down the time for discussing economic revival has arrived. G7 ministers -- from the United States, Britain, Canada, France, Germany, Italy and Japan -- meet on Friday and Saturday in Washington on the sidelines sessions of the International Monetary Fund (news - web sites) and World Bank (news - web sites), institutions that are thirsting for a role for themselves in Iraq. At the Treasury, where much of the U.S. effort is centered, officials insist the Bush administration very much wants their help along with commitments from G7 countries for financial support to help Iraq back to economic health. "There's a lot of expertise that's coming not only to the G7 meetings but to the International Monetary Fund and World Bank meetings and this is an opportunity to assess what the needs are in Iraq in the future so that this talent can be brought to bear on these needs," a senior Treasury official told reporters at a briefing ahead of the G7 sessions. TREASURY ON JOB The U.S. Treasury already has a small team of experts in Kuwait, laying the groundwork for future economic reconstruction, and that number will quickly grow to about 20 once conditions permit. Treasury officials said the team's duties include everything from helping oversee introduction of a new currency for Iraq to trying to assess the countries debts and potential financial resources. Iraq casts a long shadow across the whirlwind of talks that will occupy global financial leaders from Friday through Sunday. In its semiannual World Economic Outlook issued on Wednesday in the run-up to the sessions, the IMF forecast relatively weak global growth of 3.2 percent this year, scaled back from 3.7 percent expansion that it foresaw last fall. Weak U.S. expansion of 2.2 percent was forecast for 2003, an even softer 1.1 percent for European economies and a scant 0.8 percent for Japan. Not even mounting evidence that U.S. forces were decisively gaining the upper hand in Iraq was enough to persuade the IMF that "sputtering global growth" was poised to leap ahead. "It is not just the war -- a number of other risks weigh on the outlook," IMF chief economist Kenneth Rogoff said at a press conference. He cited the unwinding of the 1990s equity bubble, greater risks of a housing market bust, global current account imbalances, structural weaknesses in Japan and Europe, ongoing security concerns and such risks as the spread of Severe Acute Respiratory Syndrome in Asia. WARY OF BAD TURN Any bad turn in the Iraqi war that led to a more prolonged conflict could be near-disastrous, the IMF implied. It could "choke off altogether" a recovery in industrial economies and in the United States could "create potential for a double-dip recession, even with an appropriate further easing of monetary policy," the IMF warned. U.S. Treasury Secretary John Snow was preparing to once more present President Bush (news - web sites)'s $726-billion tax-cut plan as the U.S. answer to reinvigorating growth -- as he did when the G7 ministers last met in Paris in February. "It's important that each country participate in the effort to raise economic growth, each country has got to do what's best for itself in raising growth," U.S. Treasury officials said. He sounded other familiar themes like Japan's need to deal with its mountain of bad bank loans and the necessity for Europe to have more flexible labor rules so that companies can adjust their workforces and employees could more easily switch employment. The reality for the G7 ministers is that none of the major economies are performing robustly, despite persistent efforts at pump-priming such as cutting U.S. interest rates to 41-year lows. That means economists and analysts will be closely attuned to any hint of additional, coordinated measures to spur growth though there are scant hints of any forthcoming. A U.S. Treasury official suggested one possible avenue, to be discussed at the G7 sessions, was to agree to more vigorously tackle trade barriers such as those impeding cross-border financial services businesses, something that would help not only large countries but smaller ones that would benefit from the foreign expertise.