The international finance sewing circle comes to Washington to get on with their important work--kibitzing.
12:00 AM, May 4, 2004 • By IRWIN M. STELZER
"THANK GOODNESS they've left town, whoever they were," sighed Washingtonians after days of traffic mayhem. Not satisfied with the security assured by their anonymity, the G-7 finance ministers roared around Washington in their black SUVs, led by police with sirens wailing, and accompanied by armed security guards peering menacingly out of the windows of the giant vehicles. After all, the ministers of the leading industrialized countries (the United States, the United Kingdom, Germany, France, Japan, Italy, and Canada) tend to regard themselves as the Magnificent Seven when the 184-nation International Monetary Fund and the World Bank hold their Spring meetings. Taxicabs are for representatives of lesser countries.
With all of the formal work completed by their sherpas before they arrived, only a few chores remained for the ministers. The first was to avoid expressions of incredulity when U.S. Treasury Secretary John Snow explained why a budget deficit that has soared to 5 percent of GDP doesn't really matter, and is "manageable and understandable." And not a single snort of derision could be heard when he laid out deficit-cutting plans that the assembled ministers know will never pass Congress.
Still, since most of the G-7 countries are counting on continued spending by the U.S. government and American consumers to buoy the global economy, their finance ministers were not entirely unhappy to hear of America's plans to keep the cash registers ringing in American shops--that are stocked with imported goods.
THE SECOND ASSIGNMENT for the ministers was to express satisfaction with the state of the world economy, a chore they disposed of with little difficulty. After all, the International Monetary Fund is forecasting that the world economy will grow at a rate of 4.6 percent this year, up from last year's healthy rate of 3.9 percent.
With such good news to revel in, why bother with the nasty fact that almost all of the growth will be provided by the United States and China, while Germany and France, having refused to adopt the structural reforms promised at the Lisbon meetings, wallow in double-digit unemployment? Nor did the ministers feel it necessary to comment on an Economist Intelligence Unit's forecast that growth in the European Union will continue to lag behind America's.
INSTEAD, most of the time was spent doing what finance ministers do best--tucking in at lavish dinners, plotting, and gossiping, Britain's chancellor, Gordon Brown, being something of an exception: He was spotted browsing the used book stalls in Georgetown in search of some intellectual sustenance.
The hottest topic was Federal Reserve Board chairman Alan Greenspan's plan to raise interest rates--not whether, but when, and by how much. With the U.S. economy growing at about 5 percent, the manufacturing sector experiencing its fastest growth in five years, consumer confidence on the rise, new-home sales up 8.9 percent in March, Wall Street clocking up big profits and paying out-sized bonuses, smiles returning to the faces of Silicon Valley options holders, pricing power returning to board rooms, and the inflation rate now up to 2 percent, the G-7 ministers know that Greenspan will have to move rates up. Their hope is that he will do so later rather than sooner, and by tiny increments. They are likely to get at least one of their wishes.
Private discussions of the most contentious topic--joblessness in France and German--promptly leaked. This revealed the strains created by monetary union and the European Union's one-size-fits-all interest rate policy. France's Nicolas Sarkozy and Germany's Hans Eichel berated Jean-Claude Trichet, president of the European Central Bank, for not lowering interest rates to stimulate economic growth in their countries. Sarkozy complained that he has no control over his own economy, and Eichel whined that the ECB is taking account of the European average rather than the needs of Germany. Fortunately, Brown, who saved Britain from a similar fate by erecting so many barriers to his country's adoption of the euro that even Prime Minister Tony Blair couldn't clear the hurdles, suppressed a chuckle.
No round of gossip would be complete without a discussion of who-gets-what-jobs. It was settled in advance of the meeting that Spain's Rodrigo Rato--whose reformist credentials are in order but who has no experience managing international financial crises--would land the plum post of managing director of the IMF. But this consensual succession may well be the last, as developing nations have decided henceforth to challenge the notion that the job is to be reserved for a European.