G-7 brush off single economic remedy

G-7 brush off single economic remedy

By YURI KAGEYAMA, AP Business Writer 24 minutes ago

TOKYO - The world's leading economies pledged on Saturday to work together to secure stability in volatile markets but brushed off the idea of a single uniform remedy for the Group of Seven industrialized nations.

A joint statement, issued at the end of an afternoon meeting of the G-7 finance chiefs and central bank governors, acknowledged "downside risks" remain for the global economy and warned of dangers of the U.S. housing crisis, while assuring that U.S. growth was expected to continue in 2008.

The officials from the United States, Japan, Germany, France, Canada, Britain and Italy also urged oil-producing nations to boost output, and encouraged China to accelerate the appreciation of its currency.

"Going forward, we will continue to watch developments closely and will continue to take appropriate actions, individually and collectively, in order to secure stability and growth in our economies," the statement said.

The G-7 had faced calls for increased coordinated action to deal with the U.S. housing problems in subprime mortgage loans, financial market turmoil, high oil and commodity prices, and heightened inflation expectations.

The various countries, however, have differed on what measures were appropriate. The U.S. has urged other countries to pursue policies to boost domestic demand, while the Europeans said their economies were resilient and focused more on regulatory coordination.

Japanese Finance Minister Fukushiro Nukaga, who played host to the gathering at a Tokyo hall, said the economic conditions in each nation were so different that a uniform remedy was not feasible.

"It is important that each nation take measures that are appropriate for that nation," he told reporters after the meeting.

U.S. Treasury Secretary Henry Paulson urged G-7 nations to react "resolutely and proactively" to market turmoil, but warned there were no quick fixes.

"The current financial turmoil is serious and persisting," Paulson said. "While financial markets are improving, it will take time to work through the current financial turmoil."

He said the U.S. economy will continue to grow this year, despite the housing credit problems, worries about a slowdown and high energy prices.

"I am confident in the long-term health of the United States economy and I expect that it will continue to grow in 2008," he said.

World financial markets have been battered since the start of the year amid worries about a possible U.S. recession and uncertainty about the full extent of the subprime mortgage crisis that has led to billions of dollars (euros) in losses at major banks.

U.S. efforts to tackle the credit crunch was a key discussion topic, the officials said.

The joint G-7 statement took note of the downturn in the global economy, but it did not forecast a recession.

"The world confronts a more challenging and uncertain environment than when we met last October, though its fundamentals as a whole remain solid," the statement said.

Senior ministers had already thrown cold water on hopes that the meeting will produce any sweeping policy agreements — such as a unified move to cut interest rates.

The Fed slashed a key U.S. interest rate by 1.25 points to 3 percent late last month, and investors speculate that more cuts may be coming. On Thursday, the Bank of England cut its rate a quarter point to 5.25 percent.

The European Central Bank, which sets policy for the euro-zone, appears to be leaving the door open for a rate cut, but it is unlikely to take as drastic a move as the U.S. because of inflation concerns. The Bank of Japan is even less capable of action with its key rate at 0.5 percent.

Finance chiefs from China, Russia, South Korea and Indonesia were expected to join the G-7 officials at a dinner later to expand the discussions.

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U.S. says global markets face prolonged turmoil
Reuters - 1 hour 10 minutes ago

TOKYO (Reuters) - U.S. Treasury Secretary Henry Paulson said on Saturday the global economy faces a prolonged period of financial market disruption but expressed confidence the United States would not be dragged into recession.
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"The current financial turmoil is serious and persisting," Paulson said in prepared remarks after meeting fellow finance chiefs from Group of Seven industrial countries.

"As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is repriced," he added.

Paulson said he expected U.S. economic growth to continue in 2008 but conceded the outlook faced risks that had made a fiscal stimulus package absolutely necessary.

"The housing correction, high energy prices and capital market turmoil have combined to weigh on near-term growth," Paulson said, adding that he felt the $152 billion fiscal stimulus package that Congress passed just before he flew to Tokyo would help and was vital.

"Given the short-term downside risks, we clearly needed to act," Paulson said. Paulson only arrived in Tokyo in the early hours of Saturday and was scheduled to fly back to Washington on Saturday night, spending only about 18 hours in Japan.

The meeting of the G7 -- the United States, Britain, France, Germany, Canada, Italy and Japan -- took place against a backdrop of rising concern that a crisis that originated last year in U.S. subprime markets was spreading throughout the global economy.

Paulson said one lesson to be taken from it was "the increasing need for frequent communication and close coordination during times of stress" to try to find policy responses to minimize the damage.

He said G7 members had discussed the sensitive issue of rising investments by so-called Sovereign Wealth Funds -- many of them in countries like China and the Middle East that have acquired big current account surpluses. Paulson said while their activities needed monitoring, and possibly a code for behavior, they should not be seen as a reason for pushing protectionist remedies that could slow global trade.