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Wednesday, 26 June, 2002, 15:47 GMT 16:47 UK
Fraud scandal clouds G8 summit
Gerhard Schroeder, Tony Blair, Jacques Chirac, George W Bush
Leaders will also discuss aid to Africa
As world leaders from the Group of Eight (G8) industrialised nations gather in western Canada to discuss aid to Africa, another corporate accounting scandal threatens to overshadow the talks.

Telecoms-giant WorldCom disclosed late on Tuesday that it fraudulently boosted profits by $3.8bn (2.5bn) during the 15-month period between January 2001 and March 2002.

The news sent stock markets around the world tumbling with the Dow Jones Industrial Average, a measure of big-stock performance in the US, falling 175 points in early trading in New York.

The scent of yet another accounting scandal, on top of Enron, Adelphia and others, has severely damaged the credibility of US markets, usually touted as the most transparent in the world.

But news of this latest accounting debacle has dampened foreign investment and threatens to discourage a whole generation of American investors from investing in US stocks.

Major differences

Seven of the leaders from the G8 countries - Canada, Germany, France, Britain, Japan, Italy, Russia and the US - arrived in Kananaskis, Alberta, on Tuesday to begin two days of discussions about global issues.

Russian President Vladamir Putin is due to arrive on Wednesday.

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Aid to Africa is expected to dominate the talks on Wednesday, although the large drop in stock values on markets worldwide is bound to creep into discussions.

Major differences are expected to emerge between the United States and a group of European countries, with Britain, France and Germany urging a substantial increase in aid for African development.

Tony Blair is due to meet Mr Bush on Wednesday to discuss aid plans.

The two men will also talk about the growing dispute over trade issues, after the US imposed tariffs on foreign steel imports.

Tight security

The leaders, including Italy's Silvio Berlusconi, France's newly re-elected President Jacques Chirac, and Germany's Gerhard Schroeder, will be cloistered in two luxury hotels high up the Rocky Mountains.

They will be guarded by thousands of police within a 20 mile security zone and there will be a single road into the resort with 16 checkpoints.

Russian President Vladimir Putin will complete the G8 group of countries when he arrives on Wednesday.

The unprecedented security arrangements stem from a fear of anti-globalisation protests, which turned violent at last year's G8 summit in Genoa and resulted in the death of a protester.

Protests for the most part have been mild in Calgary, about 60 miles (100 kilometres) away.

On Tuesday night, however, about 1,000 demonstrators marched through the streets to protest about a party given for the media.

Canada is hoping that the intimate nature of the gathering will facilitate frank discussion by the world leaders.

Terrorism and Middle East

They will be joined by four key African presidents on the last day of the summit on Thursday, including South African President Thabo Mbeki.

The Africans are hoping for endorsement of their New Economic Partnership for Africa (Nepad) plan.

This involves the gradual transfer of $65bn in fresh private and public resources to Africa over the next decade in return for improved governance and an attack on corruption.

Africa has fallen further behind the rest of the world in the last two decades, as falling commodity prices, wars, and the ravages of diseases such as HIV/Aids have hurt economic growth.

But the United States is likely to attach more importance to continuing the fight against terrorism - and Mr Bush will have to address concerns among Europeans about extending the war to Iraq and other countries.

Mr Bush has already moved unilaterally with his plan for peace in the Middle East, and his call for the Palestinians to replace Mr Arafat will be not welcomed by all.

In the balance

The leaders will also discuss the current state of the world economy, which is expected to come out of recession in the second half of the year.

But there is uncertainty about the strength of the recovery in the United States, particularly after the revelations about WorldCom.

And Japan's economy is in a fragile state, with a huge burden of public debt and little growth despite near-zero interest rates.

Even before the latest US accounting scandal, worries about the US recovery had contributed to a slide in the dollar and heavy falls on US stock markets, which had exacerbated trade tensions.

Japan, in particular, would like a weaker yen to help its recovery.

But the leaders are expected to reject calls for currency co-ordination, the focus of G8 summits in the l980s, and urge Japan to push forward with its own reforms instead.

Key stories

Aid debate

Africa's future





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