Industrialized nations fail to generate global growth
MOUNTING domestic pressures in the world's richest countries have impinged on their ability to fulfill their collectively assumed policy: generating global economic growth.
During meetings in Washington this week, the Group of Seven (G-7) leading industrial nations - the United States, Britain, Canada, France, Germany, Italy, and Japan - are more absorbed in their own deficiencies than in tackling tough problems.
Germany's burgeoning budget deficits, Japan's financial downturn, and a sluggish US economic recovery have left these three major powers - the so-called troika of the G-7 - looking inward. Coordinated efforts, such as shoring up Russia's reforms and forging ahead with a world trade agreement, have been greatly compromised.
"G-7 growth this year will be significantly below potential and inadequate to reduce high levels of unemployment in many countries," says Undersecretary of the US Treasury for International Affairs David Mulford. That scenario jeopardizes the successful "transition of Eastern Europe and the [former Soviet republics] to market economies," he says, referring to the G-7's most formidable challenge.
Mr. Mulford focuses on Germany, the dominant economy on the European continent. Its huge bills for rebuilding eastern Germany have led to a large fiscal deficit. That, coupled with the Bundesbank's (Germany's central bank) tight monetary policy, hinders growth in former Communist countries now banking on Western European capital and markets. He faults Germany, for "causing high interest rates, slow growth, and contributing to unemployment" in Europe.
While German Finance Minister Theo Waigel claims that his country's deficit represents just 3 to 3.5 percent of gross national product, Mulford counters that including Bonn's big borrowing, the deficit registers at 6 percent of GNP.