http://quote.bloomberg.com/apps/news?pid=10000006&sid=atgBp9OejJ1E&refer=homeIMF, G-7 Seek `Bold' Changes to Protect Growth Amid Threats
Oct. 3 (Bloomberg) -- The global economic recovery is at risk unless governments address growing trade imbalances, budget deficits and exchange-rate inflexibility as oil prices and interest rates rise, the International Monetary Fund said. ``The recovery has been uneven, and with oil prices doubling and global imbalances worsening, we agreed that action must be taken to address risks to the recovery,'' British Chancellor of the Exchequer Gordon Brown said at a news briefing in Washington, where the IMF, World Bank and Group of Seven are meeting. ``Bold reforms on a wide front are needed.''
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Oil prices that rose 68 percent in the past 12 months ``are causing an economic headwind,'' U.S. Treasury Secretary John Snow said after Friday's G-7 meeting.
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The prospect of slower growth next year means countries must speed efforts to fix imbalances in current accounts, the broadest measure of trade in goods and services, the IMF said.
The U.S. for example needs to attract about $1.8 billion a day to fund its record-high current account deficit and keep the value of the dollar steady.
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The U.S., Europe and other industrial nations have been too optimistic about their ability to cut budget deficits and ensure money will be available to finance a growing elderly population, the IMF said. The fund earlier in the week cast doubt on a U.S. plan to cut its deficit by half in five years, and has said half the euro region nations are breaching rules that require them to keep deficit spending below 3 percent of gross domestic product.
``While most industrial countries target a gradual fiscal consolidation, in many cases this depends on relatively optimistic assumptions, and the policies are not well defined to achieve it,'' de Rato said in a statement to the IMF's policy-steering committee.
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Pension Funding
De Rato also said more needs to be done to plan for the costs of funding pensions as the baby boom generation ages.
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Officials began the meetings under
tight security with participants being ferried in vans from their hotels by police escort as several blocks around the adjacent buildings of the World Bank and IMF in downtown Washington were closed to vehicles and pedestrians. U.S. intelligence reports in August said the al-Qaeda terrorist group may be targeting financial institutions and international organizations in New York and Washington. The World Bank and IMF agreed then to shorten their annual meetings to two days from four to minimize potential threats from terrorists or protesters.
To contact the reporter on this story:
Julie Ziegler in Washington at jziegler@bloomberg.net
To contact the editor responsible for this story:
Glenn Hall in Washington at ghall@bloomberg.net.
Last Updated: October 3, 2004 00:43 EDT