FINANCE ministers of world's economic powers meet in Rome amid economic slowdown

Saturday, July 7th 2001, 12:00 am
By: News On 6

ROME (AP) _ Finance ministers from the world's top economic powers and Russia met Saturday to discuss weathering the global economic slowdown and to prepare a summit of government leaders later this month.

U.S. Treasury Secretary Paul O'Neill was expected to press his European counterparts on what they intend to do to promote growth and stave off recession.

Germany and France _ Europe's two biggest economies _ have slashed their growth estimates just as the United States shows signs of improvement. O'Neill suggested before departing for Rome that a continuing tailspin in Europe could undermine the U.S. comeback.

``When we slow down, they feel it. And I think it's true that we are also on the other end of that sometimes,'' he said Thursday in Washington.

O'Neill can point to the Bush administration's $1.35 trillion tax cut and a series of interest rate reductions by the Federal Reserve _ putting Europe and Japan on the spot.

After morning meeting between O'Neill and his Japanese counterpart Finance Minister Masajuro Shiokawa, O'Neill spokeswoman Michele Davis said O'Neill had ``expressed appreciation'' for Japan's economic reform efforts, calling them ``vigorous'' and ``comprehensive.''

The Japanese government has pledged to tackle a number of thorny issues, including measures to help banks write off huge sums of soured loans and steps to rein in wasteful public spending.

German Finance Minister Hans Eichel, on the other hand, talked up the resilience of the European economy, saying it is stronger than that of the United States and Japan.

``In Germany, there are some positive signals. We have overcome the peak of inflation,'' Eichel said at the Saturday morning briefing.

But Eichel also stressed the euro zone's dependence on a quick U.S. rebound, adding that a recovery could begin in the second half of the year.

Britain's treasury secretary, Gordon Brown, said the worst is yet to come.

``The downturn in the world economy has not yet reached the bottom,'' he said in a British Broadcasting Corp. radio interview.

He said the Frankfurt-based European Central Bank should follow the lead of the United States and Japan and lower interest rates to stimulate the euro.

``We must recognize that this is a global problem,'' he said. ``Europe, too, must engage in economic reform.''

Britain does not use the struggling euro.

The one-day Group of Seven, or G-7, meeting involves top finance officials from the United States, Japan, Germany, France, Britain, Italy and Canada. Russian officials were also present to hold bilateral talks on the sidelines of the main event.

The delegations were preparing the economics agenda for a July 20-22 summit of G-8 leaders in the northern Italian city of Genoa.

Also on Saturday's agenda will be plans to overhaul the International Monetary Fund and the World Bank and efforts to crack down on money laundering and tax cheating.

U.S. growth for the just-completed second quarter is expected to come in below the first quarter's 1.2 percent rate, but O'Neill said he is confident growth will pick up again this year.