G7 finance chiefs see growing risks to global economy
Top world finance ministers warned Saturday that the global economy
faces growing threats from a US housing slump and credit crunch, urging
banks to come clean on their subprime loan losses.
The finance chiefs from the Group of Seven industrialised nations
said their economies were set to lose steam in the near future but
remained fundamentally solid, according to a draft statement from a
meeting here Saturday.
"In all our economies, to varying degrees, growth is expected to slow
somewhat in the short-term, reflecting wider global economic and
financial developments," according to the statement obtained by AFP.
The US economy faces growing risks with the potential for a further
deterioration in the housing sector, according to the draft.
"In the United States, output and employment growth have slowed
considerably and risks have become more skewed to the downside," said
the G7, which groups Britain, Canada, France, Germany, Italy, Japan and
the United States.
The ministers warned that global growth may be curbed by a further
deterioration of the US housing market, tighter credit, high oil and
commodity prices and growing inflationary pressures.
A US housing slump, led by rising mortgage defaults among "subprime"
or high-risk customers, has triggered a credit crunch that has wreaked
havoc on world markets in recent months.
The finance ministers urged "prompt and full disclosure by financial
institutions of their losses" from the US subprime crisis.
Banks, particularly in the United States and Europe, have suffered
heavy losses from their exposure to securities backed by troubled US
mortgages.
The G7 finance ministers "stand ready to take any further action
necessary to enhance stability in the financial market," the draft said.
But it made no mention of coordinated remedial action to try to
bolster their economies or stock markets.
The US government has prepared a 150-billion-dollar package to
stimulate its flagging economy, while the Federal Reserve has slashed
interest rates several times since last September.
But analysts say other G7 members have more limited room for measures
to stimulate demand, particularly Japan, the world's second-largest
economy, which has huge national debts and interest rates of just 0.5
percent.
The G7 ministers also urged world oil producers to boost their output
to rein in soaring crude prices.
While high oil prices largely reflect rising world demand,
"geopolitical concerns" are also a factor, the statement said.
"We encourage oil-producing countries to raise production, and
reiterate the need to enhance refinery capacity and improve energy
efficiency," it added.
World oil prices struck a high above 100 dollars at the start of the
year, but they have since cooled on market worries that a US recession
and slowing global economic growth could curb demand for energy.
The final version of the G7 statement was also expected to renew a
call for China to allow a faster appreciation of the yuan.
There may be calls behind closed doors from European ministers for
action to try to stem the dollar's decline, analysts said.
But publicly the G7 is unlikely to shift from its previous official
stance that foreign exchange rates should reflect economic fundamentals
and that excess volatility is undesirable, they added.
- AFP |