America and its wealthy allies expressed optimism yesterday about the global economy, saying overall prospects have improved despite worries about rising oil prices and violence in the Middle East.
The Group of Seven major industrial countries — the United States, Japan, Germany, France, Britain, Italy and Canada — struck an upbeat tone while acknowledging the risks.
They said they stood ready to provide financial assistance in the Middle East, hoping efforts to improve the prospect for jobs will help to stabilize what is now a deteriorating security situation.
The G-7 nations said they were prepared to help rebuild the economies not just of Iraq and Afghanistan but also the Palestinian areas of the West Bank and Gaza.
Discussing the global economy, the G-7 said in a joint statement that “prospects are favorable, and although risks remain, such as energy prices, overall the balance of risks to the outlook has improved.”
The G-7 statement was issued after discussions Friday and yesterday that were led by Treasury Secretary John W. Snow and Federal Reserve Chairman Alan Greenspan.
Those discussions were a prelude to broader talks at the spring meetings yesterday and into today of the 184-nation International Monetary Fund and World Bank. The meeting was under heavy security at the headquarters buildings of the two institutions only blocks from the White House.
This year’s meetings were being held against the backdrop of a global economy that is expected to benefit this year and next from the fastest growth that the world has seen in a decade, according to the latest IMF forecast.
However, the IMF also cautioned that this bright prospect could be derailed if oil prices spike even higher or if the unstable security situation in Iraq begins to weaken consumer and business confidence in financial markets around the world.
The Bush administration resisted criticism from other countries that America’s soaring trade and federal budget deficits presented a major threat to future global prosperity because they run the risk of pushing interest rates higher.
Mr. Snow said that the administration has a credible plan to cut the budget deficit in half over the next five years. He said the answer to America’s trade deficit was for other countries, particularly in Europe, to grow faster and provide stronger markets for U.S. exports.
On the matter of currency rates, the G-7 finance officials repeated the language they adopted at their previous meeting in Boca Raton, Fla. — that “excessive volatility and disorderly movements” in exchange rates was not desirable, but that in some cases “more flexibility” was needed, a reference to China.
The United States has been campaigning to get China to stop linking its currency, the yuan, tightly to the U.S. dollar, a policy that American manufacturers contend greatly undervalues the Chinese currency and gives Chinese companies a huge competitive advantage over U.S. products.
The discussion about currency values was much more subdued this time than at the February meeting because the dollar has recovered some of its losses against the euro, the common currency of 12 European nations.
The rise in the euro’s value against the dollar had been causing major distress among European manufacturers, who complained that they were being forced to bear the brunt of the dollar’s adjustment because of China’s fixed-currency policy and massive Japanese intervention to keep the yen from strengthening too much against the dollar.
However, with the dollar’s rebound in recent weeks, European complaints have softened. The administration, trying to show it is dealing with the issue of U.S. manufacturing-job losses in an election year, is continuing to pressure China to eliminate the yuan’s tight link to the dollar.
The G-7 nations did not provide specifics about what the amounts of economic assistance they were prepared to provide in Iraq, Afghanistan and the West Bank and Gaza.
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