G7 to discuss global hot spots; oil price
Washington, April 14, 2011
Uncomfortably high oil prices, unsustainable sovereign debt burdens and Japan's uncertain future cloud the global economic outlook as world finance leaders gather on Thursday.
Group of Seven members, who meet behind closed doors in the evening, will try to assess the economic damage from Japan's earthquake and uprisings in the Arab world.
'There's very high uncertainty about Japan's outlook,' said Naoyuki Shinohara, deputy managing director of the International Monetary Fund.
The larger G20 club of advanced and developing economies holds a working dinner later to push forward on a plan for building a more stable global economy less prone to the booms and busts that have marked the last two decades.
Neither group is expected to release a statement on Thursday, with the G2O waiting until it wraps up a day-long meeting on Friday.
The best clues to the agenda on Thursday may come in public remarks by US Treasury Secretary Timothy Geithner and French Finance Minister Christine Lagarde. France chairs the G20 this year.
The G20 has become the premier forum for figuring out how to make sure there is no recurrence of the 2007-2009 financial crisis, which triggered the worst global recession since World War Two. G20 leaders agreed in 2009 to shrink imbalances between export-rich countries such as China and debt-burdened consumer economies including the United States, which many economists blame for contributing to the crisis.
But as the world economy recovers, the G20 has found it increasingly difficult to forge consensus on exactly how to smooth out those imbalances. Finance leaders are expected to complete work on a set of 'indicative guidelines' to spot potential trouble spots, although identifying specific countries running afoul of the rules would come later.
The US and China would almost certainly be at the top of that list, but it might also include surplus countries such as Germany and debtors like Britain.
The IMF, which holds its twice-yearly meetings this weekend, has warned the G20 not to get too complacent now that the acute phase of the financial crisis has passed.
'We understand that the process of negotiation in the G20 is much more difficult now than it was during the crisis,' said Olivier Blanchard, the IMF's chief economist.
'Countries have their own agenda. They do not always fit. So is there impatience? No, but we continue to think that it is an essential part of what is needed to return to health.'
Reducing government debt in advanced economies is part of the IMF's prescription for health. The fund caused a stir earlier this week when it said the US may have a hard time meeting a G20 goal of halving the deficit by 2013.
The US Treasury insisted Washington would meet its commitment. President Barack Obama laid out a plan on Wednesday to cut the deficit by $4 trillion over 10 years. – Reuters