Group of 7 discusses help for global economy

Treasury chief pushes tax cuts, more spending

February 23, 2003|By NEW YORK TIMES NEWS SERVICE

PARIS - Finance officials from the world's leading industrialized nations met yesterday to coordinate efforts to promote economic growth and to gird the global economy against the shocks of a potential war in Iraq.

But the Group of 7, facing similar divisions over Iraq that have split other international institutions, skirted plans that would deal with the negative economic effects of a war. Instead, the nations issued a more general statement about addressing a sagging global economy.

"If the economic outlook weakens, we are prepared to respond as appropriate," said a draft statement distributed to reporters in Paris - where finance ministers from the United States, Japan, Canada, Germany, Italy, France and Britain are meeting. "Geopolitical uncertainties have increased."

The draft statement acknowledged that the world economy is weakening, and it proposed guidelines for supporting growth in the world's various economic regions. "We will continue to monitor exchange markets closely and cooperate as appropriate," the draft said.

But many European governments, which are constrained by European Union budgetary rules, have been critical of the United States' reliance on fiscal stimuli - like President Bush's proposed tax cuts - because they cannot easily adopt such measures.

The United States, which has cut interest rates to the lowest levels in more than 40 years, is arguing for spending to prime the economy. Treasury Secretary John W. Snow, attending his first meeting of the Group of 7, spent much of yesterday explaining the merits of tax cuts and increased spending.

Wim Duisenberg, president of the European Central Bank, warned the group that uncertainty over a war in Iraq is "a key concern for growth prospects" in Europe. He hinted that European interest rates might be cut if the region's economic outlook is further threatened.

"We will not hesitate to act," Duisenberg said at a news conference. But Duisenberg opposes any relaxation of European Union budget constraints to allow more spending.

The G-7's draft statement also urged "all countries to implement and enforce laws to combat the financing of terrorism," and promised technical assistance to those countries without the ability to do so.

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