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To: GST who wrote (41529)	2/20/1999 8:51:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

Saturday February 20 2:54 PM ET G7 Sees Lower Growth, Frets About Russia By Alan Wheatley, European Economics Correspondent BONN (Reuters) - Finance ministers of the Group of Seven industrial nations admitted Saturday that the outlook for the world economy had deteriorated and pledged to redouble efforts to keep growth on track. At a day-long meeting near Bonn, the ministers voiced serious concern about Russia's economic plight and agreed to keep a closer check on flows of footloose capital to try to nip future financial crises in the bud. Exchange rates, including a sharp fall recently in the value of the yen, were discussed only briefly, although ministers did reaffirm their determination to avoid excessive swings and significant misalignments in currency markets. The ministers from the United States, Japan, Britain, France, Germany, Canada and Italy said there had been encouraging trends since their last meeting on October 30. Asia was stabilizing after the trauma of recession and financial turmoil, rich-country stock markets had calmed down, the European Union had successfully launched its single currency and interest rate cuts had been cut in the United States, Europe and Japan. ''But financial market conditions have worsened in some regions and the outlook for global economic growth is somewhat less favorable. The impact of financial crises is now felt beyond the regions where the crises occurred,'' the ministers said in a communique. ''Against this background, it is of the utmost importance to strengthen in all countries the foundations for sustainable growth of output and employment...,'' they added. U.S. officials said the communique's stress on the need for domestic demand-led growth was a victory for Washington's insistence that Japan and Europe must buy more from developing countries desperate to export their way back to economic health. U.S. Treasury Secretary Robert Rubin said that the outlook for the U.S. economy was favorable, but that Japan and especially Europe needed to boost growth. ''It is very important for the world that Europe get back on track,'' said Rubin, worried that a big jump in the U.S. trade deficit last year to a record $169 billion could fan protectionism and create financial problems for America. ''On the question of how, we had a lot of discussion,'' he told a news conference. Japan, by contrast, got off lightly. Finance Minister Kiichi Miyazawa said the rest of the G7 had made no specific demands. ''The bottom line is they did not say 'do this, do that'. The consensus was that Japan has done what it can and that we could now only await results,'' Miyazawa said. The Tokyo government has gone on a spending spree and the central bank has reduced interest rates close to zero in a hitherto vain attempt to drag the world's second-largest economy out of its deepest recession in half a century. The G7 reserved the most direct language of its communique for Russia, whose de facto default on its foreign debt last summer sent world markets into a dangerous tailspin that ended only with deep interest rate cuts by the U.S. central bank. The ministers, who were joined for part of the day by Finance Minister Mikhail Zadornov, said they remained concerned by the economic situation in Russia and its mounting debt arrears. They urged Moscow to pass a viable budget for 1999 and grasp the nettle of reform so that it could strike a deal with the International Monetary Fund. The seven ministers, who were accompanied by their central bank governors, also instructed global financial regulators to cooperate more closely to head off the sort of market turmoil that is hobbling world economic growth. They endorsed a report by German Bundesbank President Hans Tietmeyer recommending the creation of a new ''financial stability forum'' to try to prevent a repeat of the crises that have shaken Asia, Russia and Brazil in the past two years. The forum, made up of officials from existing international bodies, will meet at least twice a year to sound the alarm if it spots worrying trends in global capital flows.