Banking group urges G7 action

  • Business
  • Thursday, 03 Apr 2003

WASHINGTON: Even if the war in Iraq ends quickly, the global economy faces serious problems that will require a co-ordinated effort from rich nations to bolster prospects, a leading financial lobbying group said. 

The Institute of International Finance (IIF), which represents over 300 of the world's most powerful private sector banks and investment houses, urged economic leaders attending the upcoming International Monetary Fund (IMF) and Group of Seven (G7) industrialised nations meetings to tackle pressing economic issues. 

“Concerns about the economic outlook reflect not only the Iraq situation, but also the underlying fragility that is a consequence of the lingering imbalances and excesses accumulated during the bubble years,” IIF managing director Charles Dallara wrote in an open letter to IMF policy-makers ahead of their meeting in the middle of this month. 

“When the dust settles, literally and figuratively, the reality is that the European economy, the US economy, the Japanese economy are beset with some serious underlying challenges,” Dallara told reporters at a briefing. 

The G7 nations – the United States, Japan, Germany, Britain, France, Italy and Canada – will meet on the fringes of the IMF and World Bank’s spring meetings. The meetings are expected to focus largely on how best to bolster global economic prospects. 

The IIF forecasts the G7 economies would grow by 1.9% this year, the third straight year of weak growth since a 3.5% expansion in 2000. It also forecasts US economic growth of 2.4% this year, eurozone growth of 0.9%, and a Japanese expansion of just 0.7%. 

Underlining just how fragile the situation is, Dallara said those forecasts depended on a short war in Iraq; if the war were to drag on as long as six months, the outlook would be much worse. 

Industrialised countries should therefore act individually and collectively to build confidence between consumers and investors alike to create a platform for sustained global economic recovery, he said. 

He said the top priorities should include a bias toward easing monetary policy, including a joint commitment to act decisively if warranted and flexible fiscal policies. – Reuters  

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