High oil prices 'a threat to gobal economy'

Declaring that high oil prices are a threat to the global economy, the world’s industrialized countries urged producers to provide price relief by boosting supplies.

The Group of Seven (G7) countries – the US, Japan, Germany, France, Britain, Italy and Canada – also resolved yesterday to agree on providing Iraq with relief from its massive debt burden while also working on a deal to increase debt relief for the world’s poorest countries.

The joint statement, issued by finance ministers and central bank presidents of the G-7 countries, also repeated the officials’ desire to see all nations move to flexible currency systems.

That was an appeal to China to drop its current system, which American manufacturers contend contributes to huge trade deficits and the loss of US factory jobs.

China met finance officials over dinner yesterday, the first time the country’s officials have sat in on a G-7 event. It could signal the beginning of a process in which the world’s most populous country would be admitted to the group or at least the expanded Group of Eight, which includes Russia.

The statement on currency flexibility represented a victory for the Bush administration, which is trying to use international pressure to bolster its campaign to get China to halt its practice of pegging its currency to the US dollar.

US manufacturers contend China’s currency system has undervalued the yuan by as much as 40%, giving Chinese companies a big competitive price advantage over US companies.

Snow, who has been pressing China for more than a year to allow the value of its currency to be set by financial markets, also won a pledge from the Chinese earlier yesterday to work harder to move toward a flexible exchange rate system in a statement issued after a high-level meeting of US and Chinese policy-makers.

Democratic presidential candidate John Kerry has accused US President George W. Bush of not being tough enough on China and not doing enough to protect American manufacturers, who have shed nearly three million jobs in the past four years.

Meanwhile, the Group of 24 developing countries expressed concern yesterday about risks facing the world economy such as rising oil prices, trade deficits and higher interest rates.

While noting there has been broad-based growth in many parts of the world, the G-24 said some regions are lagging behind such as sub-Sahara Africa.

In a communique issued during the annual meetings of the International Monetary Fund and the World Bank, the G-24 said the US helped support the current global economic recovery but now needs to rein in its budget and trade deficits.

“This would help minimize the risk of disorderly exchange-rate movements and a sharp increase in interest rates that would undermine the global recovery,” the communique said.

The G-24 was established in 1971 to coordinate financial and aid policies for the developing countries. It includes members from the world’s major regions such as India, Egypt, Brazil and Mexico. China sits in its meetings as an observer.