G8 summit: World economy in ‘good condition’

Heiligendamm, June 7:

The global economy is in good shape and world economic growth has become more balanced across the different regions, the Group of Eight said in a declaration released on the second day of their three-day summit here on Thursday.

“We note that the world economy is good condition,” the statement said. “Growth is now more balanced across regions, as it has moderated to a more sustainable pace in the United States, while domestic demand has strengthened in Europe and remains supported by robust investment in Japan,” it said.

The current “sustained robust economic growth” meant that global imbalances that have built up in the past, such as the massive US trade deficit, could be unwound smoothly and safely, the club of the world’s richest nations found.

“Economic developments are now more conducive to an adjustment than in the past. However, further efforts will be required to better rebalance global demand,” the declaration continued.

The G8, which comprises Britain, Canada, France, Germany, Italy, Japan, Russia and the United States and their leaders, were meeting in this Baltic Coast resort for three days of talks on a whole range of issues, from climate change to aid to Africa.

But with the global economy currently in robust form, purely economic issues have taken more of a back seat at the talks. Instead, they have focussed more on how to counter global warming, and on criticism that the world’s richest nations have not met earlier pledges to increase aid to Africa.

The G8’s final declaration made no specific reference to demands by the West for China to make the exchange rate of the yuan more flexible. Countries such as the US have regularly accused China of keeping its currency undervalued to make its exports cheaper.

But the statement noted: “Outside our group, a number of countries in emerging Asia have taken first steps on the road to a more flexible exchange rate regime and a strengthening of the financial sector, a move which would support this adjustment.” And it continued, “In emerging economies with large and growing current account surpluses, it is crucial that their exchange rates move so that necessary adjustments will occur.”

The G8 found that oil-producing countries had increased investment in oil-production capacity “and many have made prudent use of their export revenues to promote the diversification of their economies and employment.”

US agrees to CO2 cut

London: George Bush pledged the United States to a “substantial” cut in greenhouse gas as the west’s leading industrial nations agreed to negotiate a new climate change deal within the next two years.

After strong lobbying from EU leaders, Bush agreed to “seriously consider” a proposal that would result in a 50 per cent cut in carbon emissions by 2050 but made it clear that US involvement depended on India and China being included in any agreement. Tony Blair, who had used his last one-to-one meeting with Bush to press for a strong G8 commitment to a multilateral UN treaty to succeed the 1997 Kyoto accord, described yesterday’s breakthrough as “a huge step forward”.