US slowdown on G7 agenda

Ministers will congregate in Palermo this weekend

Asia and Europe must themselves contribute to economic expansion instead of relying on the US to provide growth, Washington's new Treasury Secretary Paul O'Neill said.

I can go into my office and look at my machine and find out what's going on right now in London. I don't need to go to Palermo to find out

Paul O'Neill
US Treasury Secretary

His comments come ahead of a meeting with the Group of Seven (G7) finance ministers in Palermo, Sicily this weekend.

G7 ministers are expected to discuss the slowdown in the US and attention will be likely to focus on what Japan and Europe can do to ensure the world economy remains on track.

"The world must not rely on the United States as the engine of global growth," Mr O'Neill said.

"Europe and Japan must tackle challenges in their economies to help contribute to global expansion and a reduction in external imbalances."

The meeting in Palermo will be the first bilateral meeting between O'Neill and Kiyazawa

It is believed Mr O'Neill made the comments as a counter offensive to anticipated suggestions from G7 partners that the US do more to get its trade deficit under control and to do more to persuade Americans to save more money.

First US trip

In Palermo, Japanese Finance Minister Kiichi Miyazawa will hold his first bilateral meeting with Paul O'Neill.

The Japanese minister is expected to come under pressure to ease concerns about the slowdown in the world's second biggest economy.

Mr O'Neill has already called on Japan to improve its production of goods and services in order to spur economic growth.

"The question of how Japan rises to a higher level of real growth is how Japan can, at the goods and service producing level [better combine] its resources," Paul O Neill said.

Some speculation exists that Europe could come under pressure to lower interest rates, following recent rates cuts in the US and Japan.

Famous travel partner

Mr O'Neill is travelling to Italy with US central bank Chairman Alan Greenspan. The two had breakfast on Thursday morning to discuss the issues that might arise at the conference.

The meeting in Palermo will be the first bilateral meeting between O'Neill and Kiyazawa

The G7 is made up of the world's most industrialised nations, which include the United Kingdom, the United States, Canada, Japan, Germany, France and Italy.

Mr O'Neill said he intended to play student at the upcoming conference and intends to listen and learn.

"I hope I'll be a worthy childlike person in this first engagement with my counterparts at the G7," he said.

Prior to taking the post of treasury chief, Mr O'Neill served as an executive for aluminium-manufacturer Alcoa.

But even as he began his travels, he questioned the very necessity for such a trip.

Other concerns

In an interview on Thursday with the Financial Times newspaper, Mr O'Neill said he did not believe the primary focus of the meeting was so head finance ministers could find out what was going on in one another's countries.

"I can go into my office and look at my machine and find out what's going on right now in London. I don't need to go to Palermo to find out," he said.

In his comments, Mr O'Neill also warned about the dangers of crises and the role of the International Monetary Fund (IMF).

The world must not rely on the United States as the engine of global growth

Paul O'Neill
US Treasury Secretary

"Crises strike when there is a failure to detect them early or a failure to identify and implement the measures needed to avert them," he said.

IMF member countries needed to do a better job of monitoring for potential crises in the world and making them known, Mr O'Neill said.