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Monday, 16 July, 2001, 07:59 GMT 08:59 UK
G8 weighs recession fears
New York Stock Exchange
Markets have been rattled by slowdown fears
By BBC economics correspondent Andrew Walker

They always used to be called the economic summits.

Times have changed and international political crises often dominate.

But this time there is a nagging uncertainty hanging over the economic business. Is there going to be world recession?

The doubts have been building for about a year. That is when economic growth in the US started to slow down.

Today we still don't know whether the US is going to suffer a recession - or indeed whether it already has succumbed to a fate most often defined as two consecutive quarters of declining economic activity.

Many economists think the US will avoid it - narrowly - and that growth will accelerate again in the final three months of this year or the first quarter of next.

World impact

But this much is clear: whatever it is that is happening in the US, it has already made its mark in the rest of the world. And it could well get worse.

Europe, including the UK is feeling the pinch much more than was expected.

The British Chambers of Commerce says industry, which for about a quarter of the economy, is on the brink of recession, although services are holding up much better. Germany is slowing very sharply.

Japan has its own severe, long-running, home-grown problems.

Junichiro Koizumi
The new Japanese premier has vowed to instigate reforms
But they have been exacerbated by weaker exports to the US. Japan probably is in recession now.

And some developing countries are also being hit.

Contagion fears

East Asia was the first.

It built its recovery after the crisis of 1997 and 1998 on exporting electronic equipment to the US, a market that has subsequently been undermined by the bursting of the technology bubble.

Mexico's exports are dominated by the US and it might be on the brink of a recession.

US Treasury Secretary Paul O Neill
The US Treasury Secretary predicts a rebound in growth
And the financial crisis and possible debt default in Argentina owe a great deal to the US slowdown.

Against this background it was striking that some finance ministers from the G7 - Russia is not included in finance ministers' meetings - were relatively upbeat about the outlook when they met in Rome earlier this month.

The US Treasury Secretary Paul O'Neill predicted a strong rebound in growth next year.

The usual niggles surfaced in the run-up to that meeting, and no doubt they will be in the background at Genoa too.

Trading up

There were hints from the US that continental Europe and Japan weren't doing enough to maintain the momentum of global economic growth, a theme that surfaced repeatedly in the G7 and G8 during the long US boom in the 1990s.

And we can expect a strong call in Genoa for more trade liberalisation talks.

The World Trade Organisation is trying to launch a new round of such negotiations at a meeting in Doha, in Qatar in November.

The last time the WTO held a ministerial meeting, in Seattle in 1999, it tried and failed to do that.

The G7 (it is not such a priority for Russia which is not a WTO member) want to avoid a repeat of that embarrassing failure.

See also:

16 Jul 01 | Business
Q&A: G8 Summit explained
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