With signs of a slowdown in the U.S. economy casting a shadow over the global economy, the Group of Seven finance ministers and central-bank governors who gathered in Palermo, Italy, last weekend emphasized the need for coordinated action to ensure sustainable growth worldwide. That appeal for cooperation, however, was underscored by a shared sense of self-responsibility and self-help, imparting a certain detachment to the joint statement issued at the end of the meeting. As U.S. Treasury Secretary Paul O'Neill said of Japan, the G7's underlying message is: Consider what you can do to solve your own problems.
The statement is cautiously optimistic about the slowing U.S. economy, saying that its fundamentals remain strong. A less upbeat assessment could have further unsettled already nervous stock and currency markets, given continuing fears that the world's largest economy might be slipping into a recession. The guarded optimism also reflects the fact that U.S. fiscal and monetary policy is well positioned to stimulate growth. The Federal Reserve Board has already cut interest rates several times in rapid succession, while President George W. Bush's administration is committed to a 10-year, $1.6-trillion tax reduction. However, the G7 statement, in a veiled reference to the massive tax-cut plan, makes the right call in urging fiscal moderation.
The euro-zone economy, by contrast, appears to be in fairly good shape. The overall assessment is that regional growth, though interrupted by temporary slowdowns, remains healthy. Growth prospects are described as "favorable" due largely to strong domestic demand in the 15-member European Union.