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G7 meeting begins tomorrow US may call for more economic growth

in Europe, Japan

WASHINGTON: The United States is expected to call for more vigorous economic growth in Europe and Japan in order to reduce imbalances that threaten global expansion at a Group of Seven finance meeting in Japan on Saturday.

In the new year, Europe and Japan should concentrate on "achieving a sustained period of growth above what has recently been considered their potential," US Treasury Secretary Lawrence Summers said recently.

Summers urged them to promote "the kind of investments that are necessary to raise the rate at which the economy can expand," which he said "will also help bring about a more balanced pattern of growth in the global economy as a whole".

Summers and other US officials have long argued that the United States cannot continue to be the sole engine of global growth.

The US treasury secretary and his counterparts from the Group of Seven Ñ Britain, Canada, France, Germany, Italy and Japan Ñ are to hold a regularly scheduled session in Tokyo Saturday to discuss world economic developments.

Washington also wants to prod its major trading partners into achieving a level of growth that will help them take in more US exports and thus reduce the gaping US trade deficit, according to Fred Bergsten, head of the Institute for International Economics, Washington research firm.

"It's all related to the very large US trade deficit, which continues to grow and could reach 300 billion dollars for 1999 and close to 400 billion in 2000," Bergsten said.

A lingering trade gap could trigger a sharp fall in the value of the dollar, which Bergsten said "would be bad for the US economy and also for the European economy, because of a sharp rise in the euro".

A surge in the euro as the dollar weakens would diminish the competitiveness of EU exports.

In addition, a plunge in the dollar Ñ making imports more expensive Ñ would aggravate inflation in the United States and could prompt the Federal Reserve to raise interest rates.

The greenback has declined by 7.2 percent against the Japanese yen since G7 finance chiefs last met in Washington in September. At the same time, the dollar has risen 5.4 percent against the euro. Bergsten predicted that to make a dent in the US trade deficit, Japan and Europe have to grow more rapidly than their current one to two percent annual rate.

At the G7 meeting on Saturday, Japan will again be pressed to move more aggressively on macroeconomic reform in order to boost consumption and construction spending and to rely less on exports, Bergsten said. AFP