BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Sunday, 9 February, 2003, 12:18 GMT
Rich world prepares economy for war
Tokyo investors
No one is yet sure of the economic effects of war
The Group of Seven leading industrialised countries are drafting a plan to prepare the global economy for the effects of a war against Iraq, according to media reports.

The plan is believed to be based on a coordinated surge in government spending, financed by heavy borrowing, in an effort to stimulate economic growth.

If true, the proposal would be a significant expansion of efforts taken since Septermber 11, 2001, which have mainly involved repeated cuts in interest rates.

Ministers from the G7 - which comprises Canada, France, Germany, Itay, Japan, the UK and the US - is likely to discuss the plan in greater detail at a Paris meeting later this month.

High hopes

The G7, a loose association of countries rather than a tangible organisation like the International Monetary Fund, exists as a forum to discuss global problems.

It has periodically intervened in the economy, most recently in 2000, when members coordinated intervention in the financial markets to bolster the euro and calm the soaring price of oil.

The initiative this time seems to be being taken by Germany, whose chancellor, Gerhard Schroeder, is a believer in interventionist economic policies.

It seems unlikely, however, that G7 members such as the UK and US would buy into a grand unified plan based on increased government spending.

Many economists are currently concerned that governments are spending too much, not too little.

And the efficacy of such programmes depends almost entirely on how extra government revenue is spent, something that may be beyond the scope of a rapidly-assembled G7 scheme.

Pluses and minuses

Another factor arguing against a set plan is that no one is quite sure what the worldwide economic effects of war would be on G7 countries.

Oil prices may rise, but they would fall just as far if Iraq were occupied quickly.

There are fears that consumer and commercial activity would slow, but the present uncertainty is seen a more severe limiting factor than the reality of war.

Indeed, many companies may be given a boost, and investors may rush to put their money into the relative safe havens of G7 financial markets.

See also:

06 Feb 03 | Business
04 Feb 03 | Business
28 Jan 03 | Business
30 Jan 03 | Business
29 Jan 03 | Business
03 Feb 03 | Business
24 Jan 03 | Business
23 Jan 03 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


 E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes