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Last Updated:  Saturday, 22 February, 2003, 21:58 GMT
G7 prepares for the worst
French Finance Minister Francis Mer (L) with US Treasury Secretary John Snow in Paris
The smiles may mask major policy differences
The world's leading economic powers have agreed at talks in Paris to "respond as appropriate" if the economic outlook "weakens".

The Group of Seven industrialised countries did not make any specific reference to the war clouds looming over Iraq in their final statement but did agree to meet again rapidly in the event of any emergency.

French Finance Minister Francis Mer, who chaired the talks between his country, Canada, Germany, Italy, Japan, the UK and the US, said there was no "hidden plan" to respond to war.

We will prove ourselves resilient to be able to deal with whatever eventualities have to be dealt with
Gordon Brown
UK Chancellor of the Exchequer
His British counterpart, Gordon Brown, said the global economy had come through other testing times in recent years and could do so again.

"Obviously whatever we have to do in relation to Iraq we will continue to maintain that stable fiscal and monetary regime and I believe we will prove ourselves resilient to be able to deal with whatever eventualities have to be dealt with," he said.

Tax dispute

The BBC's correspondent at the talks, Chris Morris, says that a policy battle does, appears to be on the cards within the G7 over American plans for huge tax cuts.

Newly appointed US Treasury Secretary John Snow defended his country's proposed cuts of $695bn.

"As the world's largest economy, if we grow, if we see improvement in our own economy, that will boost the world economy," he said.

"Each G7 nation must take its own steps - appropriate to its own respective set of conditions - to spur growth."

Britain is broadly supportive of the US - but other European members of the G7 are clearly not impressed, arguing that growing American deficits could have negative economic effects around the world.

Reeling economy

The G7's final joint statement spoke of close co-operation and said the US was implementing new policies to create jobs and increase productivity.

John Snow
Japan and European countries had, it added, committed themselves again to rapid reforms of the way their economies worked.

The meeting is a smaller prelude to a full-scale G8 summit in Evian, France, in early June.

After three years of falls, stock markets have behaved erratically this year, with many major indexes losing 10% of their value in just six weeks.

Economic growth is faltering throughout the developed world, confounding hopes that there might be a rapid and decisive recovery from the post-11 September 11.

This year, the global economy should grow by little more than 2%, the Organisation for Economic Co-operation and Development said.

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

With the addition of Russia, it has recently become the G8 - but the Russians are generally excluded from economic deliberations.

The G7 has periodically intervened in the economy, most recently in 2000, when members co-ordinated intervention in the currency markets to bolster the euro.



The BBC's Chris Morris
"Uncertainty is a dirty word in economic circles"

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