Top financial officials seek to steady nerves
WASHINGTON – The world’s most exclusive financial club sought to project an air of confidence on the heels of unsettling economic developments – a stomach-churning drop on Wall Street and gyrating global energy prices.
But Treasury Secretary John Snow, Federal Reserve Chairman Alan Greenspan and their colleagues may find it takes more than words to lower the risks to the world economy.
Oil prices are expected to remain high – and volatile – given tight supplies and rising demand, especially in rapidly developing countries like China.
Finance officials from the world’s seven richest countries on Saturday signaled their resolve to deal with the energy situation and reassure financial markets that they are on top of the matter.
“Higher oil prices are a headwind” the finance officials acknowledged in a joint statement. However, they urged producers to increase energy supplies and said countries should conserve more.
The Group of Seven countries endorsed more timely and accurate information about the oil market, which officials said could help control price fluctuations and make companies more willing to expand production.
The United States, Japan, Germany, France, Britain, Italy and Canada make up the group.
The private talks a few blocks from the White House followed Wall Street’s worst session in nearly two years. The Dow Jones industrials plunged 191 points on Friday as investors worried about high oil prices and the strength of U.S. economic activity.
In addition to the G-7 discussions, the 184-nation International Monetary Fund and World Bank were holding meetings this weekend.
At a news conference wrapping up the IMF’s policy-setting committee, British Chancellor of the Exchequer Gordon Brown said concerns about surging oil prices also figured prominently in their discussions.
The IMF panel concluded that efforts need to be made to boost supplies, including greater use of alternative energy sources. “We recognize that the volatility of oil prices and particularly the high level in recent months could have a damaging effect on growth,” Brown said. “We do believe there are measures that can be taken to make for a more efficient oil market.”
U.N. Secretary-General Kofi Annan told international finance officials Saturday evening that developing countries could be encouraged to support efforts to prevent terrorism and nuclear proliferation if they received support from rich nations for more assistance and a greater voice in global affairs.
“Developing countries are more likely to support those vital and human rights objectives if they see that donor countries are willing to make greater effort for development and to give them a stronger voice in global economic governance,” Annan said in prepared remarks.
Under tight security, several hundred people pressed for greater debt relief for impoverished countries and voiced opposition to the selection of Paul Wolfowitz, deputy defense secretary and an architect of the Iraq war, to run the World Bank. He starts on June 1.
The G-7 statement endorsed the goal of fully canceling debt for such countries. But officials have yet to resolve differences between competing plans from the United States and Britain.
“Once more the G-7 have chosen delay,” lamented Jonathan Hepburn, policy adviser for Oxfam International, a supporter of expanded debt relief.
The Bush administration also used the G-7 meeting as an opportunity to pressure China to overhaul its currency system. The finance officials advocated “flexibility in exchange rates” – the phrase they have used before to prod China.
The United States wants China to stop directly linking the yuan to the dollar. Snow said it was now time to act. “The next step is to do it,” he said, rejecting claims by Beijing that it is not ready for the switch.
The administration has come under fire from members of Congress and U.S. manufacturers to take a tough line against China. Critics contend China’s currency system hurts U.S. exports and has contributed to the loss of millions of jobs in American factories.