The Group of Seven (G7) industrialised nations salvaged a weekend meeting in London, threatened by a United States-European disagreement on helping out poor countries, but opted to tread water on two other key issues — China’s currency peg and measures to galvanise growth.
British Chancellor of the Exchequer Gordon Brown, whose ambitious plan to pour billions of dollars into Africa in form of trade and aid was dismissed by the US, was finally able to claim a victory of sorts late on Saturday.
Brown told a closing press conference that, for the first time, a G7 finance meeting had publicly expressed a readiness to provide multilateral debt cancellation of up to 100% for some of the world’s most impoverished nations.
”This summit [of finance ministers and central bankers] will be remembered as the summit of 100% debt relief,” Brown declared.
The ministers and bankers from Britain, Canada, France, Germany, Italy, Japan and the US said they have ”agreed on a case-by-case analysis of HIPC [Heavily Indebted Poor Countries Initiative] countries, based on our willingness to provide as much as 100% multilateral debt relief.”
The HIPC is a joint project of the World Bank and the International Monetary Fund (IMF) that offers debt relief to the world’s poorest nations that agree to undertake economic reform.
The London meeting had appeared to be in peril after the particpants found no common ground on Friday night, despite an impassioned personal appeal for urgent anti-poverty action by former South African president Nelson Mandela.
Brown had them all over to his house the next day in a bid to find a way around US objections to his proposed international finance facility (IFF), which among other measures would see rich countries guarantee bonds issued by poor countries.
Britain also wants the world’s richest states to cancel the $80-billion of debts owed by poor nations to the IMF, the World Bank and the African Development Bank.
But US Treasury Undersecretary John Taylor asserted that the proposal ”doesn’t work” for the Bush administration, which he said prefers its own debt relief schemes as well as the transformation of World Bank loans into grants.
Despite US opposition, Brown on Saturday said support for the IFF has grown rapidly and will continue to do so, adding that a work programme has been agreed on that will be carried out ahead of a Group of Eight summit — the G7 plus Russia — at Gleneagles, Scotland, in July.
Other hurdles
While the G7 talks appeared to make some rhetorical headway on development, the same could not be said for two other hurdles facing the ministers in London.
They made a fresh, if indirect, appeal to China to consider easing the peg that ties its currency, the yuan, to the weakened dollar and — in the opinion of US and European officials — gives Chinese exports an unfair advantage in world markets.
But there was no specific pledge by Beijing to revalue the yuan according to a precise timetable, although the head of the European Central Bank stressed that China did agree to support the G7’s overall call for more flexible exchange-rate regimes.
”What was in the communiqué has been signed and underwritten by all participants, including the Chinese participants,” European Central Bank president Jean-Claude Trichet said.
On global growth, the G7 broke no new ground this weekend, blandly repeating the need for the US to clean up its public finances and for Euorope and Japan to grow their economies.
European officials have insisted that dollar-euro volatility stems in large part from US current account and budget deficits, which upset foreign investors and thereby drive down the dollar to the detriment of eurozone exporters.
The US, for its part, contends that Europe must do more to make its economies less rigid and more market-friendly if they are to expand and contribute to sustained global momentum.
Saturday’s statement reflected a delicate balance.
”We recognise that each of our countries must play its part to support long-term sustainable growth,” it said. ”Key priorities are that the US has committed to fiscal consolidation, Europe and Japan to further structural reform.” — AFP
