Growth, forex top G7 agenda

The G7 — comprising Britain, Canada, France, Germany, Italy, Japan and the United States — is expected to build on last month’s wider Group of 20 meeting, while looking ahead to next month’s G8 heads of state summit in Northern Ireland.

Britain is this year president of the G8 — or G7 plus Russia —and is using the platform to also push for greater multilateral co-operation in tackling tax evasion.
The foreign exchange market is also likely to feature high on the agenda after the dollar topped 100 yen for the first time in more than four years overnight, as Tokyo’s aggressive stimulus efforts to reflate the Japanese economy continue to depress its currency.

Ahead of the two-day G7 meeting in Buckinghamshire, north of London, the United States has meanwhile called on Europe to further ease fiscal consolidation to avoid more economic damage.

Europe’s leaders have been successful at removing some of the more immediate risks in the eurozone debt crisis, a senior US Treasury official told reporters.
“Now the focus needs to shift to boosting demand and employment, to avoid lasting damage to the economy,” the official told a briefing.

“It’s important to recalibrate the pace of fiscal consolidation . . . continued sharp fiscal consolidation risks undermining demand.”
The European Union recently granted France two extra years to meet its deficit target on condition that it pursues reforms. But France has made clear that it does not want to go down a path of deep austerity as seen in neighbouring eurozone countries Italy and Spain.

A French source told AFP on Thursday that “it is counter-productive to set (deficit-reduction) targets that are impossible to reach because it will destroy the motor” of the economy. And the International Monetary Fund, while welcoming efforts by indebted nations to cut state spending, has urged Britain to lessen the pace of its austerity programme to support the country’s fragile economic recovery.

Japan’s policy of monetary easing has this year led to sharp falls in the value of the yen, sparking fears of a global currency war in which rival nations drive down their units to gain a trade advantage.

Japan maintains, however, that the policy is aimed at bringing growth and overcoming deflation, a major concern in the world’s third largest economy. —AFP.