A more honest G7 statement

22 Oct 2007 By Ian Campbell

The G7 issued a bland communiqué in Washington last Friday. The finance ministers and central bank governors from the biggest rich countries downplayed financial worries. We have drafted the sort of statement they might have made under a dose of truth serum.

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In a statement following the meeting of the G7 group of industrialised countries, the G7 said that "the global economy is in its fifth year of robust growth. Recent financial market turbulence, high oil prices, and weakness in the US housing sector will likely moderate this growth. Nevertheless, our overall economic fundamentals continue to be strong and emerging markets are providing critical impetus to the strength of the world economy."

On exchange rates the G7 chose not to suggest the dollar had fallen too far against the euro, which European countries were believed to have wanted, but did call for more rapid appreciation of the Chinese currency: "We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely, and cooperate as appropriate. We welcome China's decision to increase the flexibility of its currency, but in view of its rising current account surplus and domestic inflation, we stress its need to allow an accelerated appreciation of its effective exchange rate."

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