Economic vigilance needed warns G8

Global leaders are meeting amid mass protests outside

The leaders of world's seven richest nations at the 27th economic summit in Genoa have warned that the global economy is slowing faster than expected and have vowed to pursue policies that will spark a recovery.

The opening of markets and strengthening the World Trade Organisation (WTO), two primary issues for tens-of-thousands of protestors in Genoa, were economic imperatives, the G8 leaders said in a communiqué.

But the talks were overshadowed by violent demonstrations which led to the death of one protestor in a confrontation with Italian riot police.

Despite the clashes and suggestions by the host Italian Prime Minister Silvio Berlusconi that this might be the last summit of its kind, the Canadian Prime Minister Jean Chretien said there would be "no cancellation of the G8" in Canada in 2002.

Economic vigilance

"While the global economy has slowed more than expected over the past year, sound economic policies and fundamentals provide a solid foundation for stronger growth," the communiqué said, echoing the sentiment of finance ministers who met earlier in the week.

It is obscene that the leaders of the rich world can wine and dine in the splendour of a luxury liner while offering only crumbs of debt relief

Jessica Woodruffe, WDM

The leaders of Britain, Canada, France, Germany, Italy, Japan and the US promised to remain "vigilant and forward-looking" while seeking to ensure a more sustained pattern of world growth.

The outlook for both the Europe and the US was described as favourable though Japan needed "vigorous implementation of financial and corporate sector reforms".

The state of the European single currency was not addressed but the volatility of the price of oil required producing and consuming countries to remain in "close contact".

Global slowdown

But many observers believe that the world could still be heading towards a recession, with growth in the United States, the world's biggest economy, grinding to a halt.

The slowdown is spreading to Europe and Asia, with the Japanese economy still weighed down by the burden of $1 trillion in bad debts.

Against this bleak backdrop, ongoing plans to launch a new round of trade talks have been impeded by controversy between rich and poor countries.

In an attempt to appease the thousands of demonstrators converging on Genoa, the leaders have announced a package of measures to help sub-Saharan Africa.

According to UN Secretary General Kofi Annan, these include a $1.2bn health fund to fight Aids, TB, and malaria.

African disappointment

But African leaders, meeting earlier in Rome, have condemned the plan as "too little, too late."

Thabo Mbeki of South Africa, Abdelaziz Bouteflika of Algeria, Nigeria's Olusegun Obasanjo and Senegal's Abdoulaye Wade were sceptical of the global health fund, which is the only concrete result expected from the meeting.

Mr Mbeki told reporters that Africa needed at least $10bn for Aids alone and there is disappointment that there are no fresh measures of debt relief.

Jessica Woodruffe of the World Development Movement said:

"It is obscene that the leaders of the rich world can wine and dine in the splendour of a luxury liner while offering only crumbs of debt relief."

Trade row

Trade is at the top of many leaders' agenda, with the UK's Tony Blair arguing that a new trade round would do more than anything to revive the flagging world economy and help the poor.

UN Secretary-General Kofi Annan launched the $1.2bn health fund

Leaders vowed to push for the launch of an ambitious round of trade negotiations at the fourth WTO ministerial meeting in Doha, Qatar, in November.

A new round should address developing countries' priorities through improved market access and sounder, more transparent trade rules, the communiqué said.

"We recognise that there are legitimate concerns in implementing the Uruguay Round agreements (on trade liberalisation)," it added in an apparent recognition of the anti-globalisation movement.

Leaders said the WTO must become more transparent to strengthen confidence in the global trading system.

But President George W. Bush criticised protestors, telling them, "I reject the isolationism and protectionism that dominate those who would try to disrupt the meetings in Genoa."

However, US leadership of any drive for free trade has been hampered by problems with the US Congress, which has so far refused to grant the President trade promotion authority to negotiate a new trade deal.

Turkey and Argentina praised

The financial problems of Turkey and Argentina, which has threatened to spill over into another emerging markets debt default crisis, was also addressed.

Recent measures adopted in Argentina and Turkey in exchange for IMF loans were described as positive steps towards reinforcing domestic financial systems and the underlying fiscal positions.

"We commend these efforts and encourage the continued implementation of their reform programs in close collaboration with the IMF and other relevant international financial institutions," the communiqué said.