Newspaper article The Evening Standard (London, England)

Hard Time at G8 If America Ducks Global Worries

Newspaper article The Evening Standard (London, England)

Hard Time at G8 If America Ducks Global Worries

Article excerpt


THE leaders of the biggest industrial nations, the G8, could not have timed their annual meeting better.

It starts today in Canada against a background of mounting concern about the rapid slide in the dollar, the worst trade tensions for years between Europe and the United States, a very uneasy geopolitical situation from the Middle East to Kashmir, the possible financial collapse of Brazil and a distinct chance that the world is heading for recession. But our leaders say they will not be talking about any of that. The formal agenda ranges from fighting terrorism to combating poverty in developing countries, in particular Africa.

Yet one wonders how long they can keep their heads in the sand.

Since its high point this year on 1 February, the dollar has plunged 12% against the euro, with the pace of decline quickening in the past two weeks.

At the same time, share prices on Wall Street have slumped, an unusual development because the US economy grew at an annual rate of 6% in the first quarter, suggesting a recovery from last year's recession might be under way.

Three factors help to account for Wall Street's weakness: the belief that share prices are still overvalued measured by historical yardsticks, fear that the US economic recovery will be weak or short-lived so that company profits will not rebound, and the worry that foreign investors are increasingly reluctant to supply the $1.2 billion a day America needs as capital inflows to finance its current account deficit. The world needs a healthy America to buy its exports.

It looks anything but healthy as the dollar slides, however, and that could spell trouble for everyone.

That is just one problem. While the British in their pre-summit briefing tried to play down the problems on trade, officials in Continental capitals were much less circumspect. Their message was that they were spoiling for a fight.

President George Bush's threatened imposition of protective tariffs on steel imports last year caused outrage which still simmers because it served a blatantly domestic US political agenda. …

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