G-7 Leaders Reiterate Fixes for Global Economy
LEADERS at the Munich summit of the world's most advanced industrial nations agree that if they are to pep up the weary global economy, they must reduce their own budget deficits, sustain low inflation, and promote free trade.
As is true of many goals laid out in past economic summits of the Group of Seven - which includes Canada, France, Germany, Great Britain, Italy, Japan, and the United States - this is easier said than done.
Finance ministers and heads of state set similar goals at last year's summit in London, and the year before in Houston, yet real economic growth among the G-7 is crawling at under 2 percent and unemployment is growing. Roughly 23 million people are jobless today in the G-7 countries compared to 18 million in 1990.
Although concerned by stubbornly slow growth, summit participants tried to point out that some progress has been made in the last two years. For example, the average rate of inflation in G-7 countries is expected to decline to about 3.5 percent this year.
Further, the US has moved to revive its economy, with the Federal Reserve dropping its discount rate a half a point last week to 3 percent - the lowest discount rate in 29 years.
The G-7 leaders also supported recent steps taken by Germany and Italy to control their budget deficits, and welcomed Japan's newly announced five-year plan to stimulate its economy and open its markets.
German Finance Minister Theo Waigel won Cabinet approval last week for his 1993 "austerity" budget, which was put to the Cabinet two weeks early to show good faith to the G-7. Usually a model of fiscal responsibility, Germany in May was battling a 4.6-percent rate of inflation and has seen the public deficit balloon because of the costs of reunification.
Mr. Waigel's budget limits overall spending to a 2.5 percent nominal growth rate, well below current inflation, and cuts the government's net borrowing requirements by 2.5 billion deutsche marks ($1.58 billion).