The snowballing global economic crisis forced world leaders yesterday to shift from peddling austerity to nurturing growth through lower interest rates, more aid and debt forgiveness for some stricken countries.
"Exceptional pressures in financial markets and deteriorating prospects for growth in many parts of the world" have increased the risk of global recession while decreasing the risk of higher inflation, top finance officials of the world's seven largest economies said in a statement.
The Group of Seven (G-7) countries said they would act to counter the threat that plummeting demand in Asia, Russia and other countries whose economies have been struck hard by the crisis will drag even healthy economies in the United States and Europe into a worldwide downturn.
Analysts took that statement as a hint that the Federal Reserve, the Bank of England and Germany's Bundesbank could move soon to cut rates to keep growth going in the half of the world's economy that has not succumbed to the recession spreading out of Asia.
President Clinton signaled the change in policy in a speech to the Council on Foreign Relations in New York that spelled out aid measures he has placed before the G-7 to stave off recession and get Asia and other troubled regions growing again.
The G-7 will authorize assistance to Brazil and other Latin American countries through a $15 billion emergency fund at the International Monetary Fund if that is needed to prevent a collapse of their financial markets and economies, he said.
The West should also double the aid it gives Third World nations to combat hunger, poverty and social ills through the World Bank and other development banks, Mr. Clinton said.
Western banks, he added, should consider forgiving some of the debts incurred by struggling Asian nations to help them start producing and growing again.
"Clearly the balance of risks has now shifted, with a full quarter of the world's population living in countries with declining economic growth or negative economic growth," Mr. Clinton said. "Therefore, I believe the industrial …