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Wednesday, June 04, 2003

G8 Summit was Definitely not Inspiring

After all the fuss and spectacle, little important seems to have been achieved.

The G8 group of major industrial nations wound up their summit on Tuesday with a lukewarm statement of confidence in a global economic recovery. The final communique talked of "major downside risks" having receded and stated confidently that "the conditions for a recovery are in place".

But the G8 leaders left vague when they believed this recovery was likely to occur and in which of the three major economic areas - the US, the EU and Japan - the recovery is likely to first occur. The US currently is facing weak growth, in Europe the eurozone economies are flat with Germany hovering on recession and Japan is still struggling with a period of prolonged recession. The principal aim of this summit hosted by French president Jacques Chirac was to launch a new message of confidence. But on economic and other issues the summit remained plagued by transatlantic differences.

There was no mention in the final statement of exchange rates and the current sharp depreciation of the dollar against the euro. When pressed about this on Tuesday in his final press conference, President Chirac skirted the issue. This implied the G8 had no formal consensus and was waiting for currencies to find their level. The Europeans await the decision of the European Central Bank later this week when interest rates are expected to be trimmed.

The G8 committed themselves to trying to unblock the stalled trade talks in the Doha round but concessions on agricultural subsidies where not formally made by any of the European countries, particularly France. But one positive sign were the pledges by eurozone members France and Germany to implement structural reform in their economies. This had special relevance when France faces a wave of strikes, including a crippling transport strike on Tuesday, to protests against plans to overhaul the costly pensions system.
Source: Financial Times

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