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Storms Have Only Temporary Effect on U.S. Economy

Storms Have Only Temporary Effect on U.S. Economy, Snow Says

Treasury secretary cites concern about oil prices at G7 finance meeting

By Kathryn McConnell
Washington File Staff Writer

Washington -- While the economic impact of two hurricanes in the United States will affect the U.S. economy temporarily, the U.S. deficit will be "well below" the current level by the end of 2009, says U.S. Treasury Secretary John Snow.

Briefing reporters September 23 following a meeting of Group of 7 (G7) finance ministers and central bankers in Washington, Snow said "the American economy remains in good posture and on a good path."

The G7 comprises the United States, Canada, France, Germany, Italy, Japan and the United Kingdom. Meeting with the finance leaders from these countries were representatives of Brazil, China, India, Russia and South Africa.

Snow said the officials agreed that the overall global economy "is in good shape" and that the finance officials said that addressing global budget imbalances is a "shared responsibility."

He called for "further labor and product market reform" as essential for increasing the potential for global growth.

Snow said the issue of the spike in oil prices came under "extensive discussion" at the G7 meeting. The rise in prices is leading to an adjustment in demand for oil, with more conservation, he said.

In its communiqué, the G7 said it welcomed actions by the International Energy Agency and by oil-producing countries to make additional oil available to the market.

In its meeting, the G7 also called for significant investment in oil exploration, production, energy infrastructure and refining capacity.

Snow said in a statement issued following the G7 meeting that liberalizing financial services and "promoting efficient, well-regulated services" can be key to achieving growth and stability, especially in developing countries.

The Treasury secretary said the G7 reaffirmed its call for the International Monetary Fund (IMF) and World Bank to conclude an agreement soon for total debt forgiveness to the world's poorest countries.

"This [debt reduction] proposal will provide additional resources for [these] countries' efforts to reach the goals of the Millennium Declaration, foster longer-term debt sustainability and improve balance of payment positions," according to the G7.

The Millennium Declaration for global poverty reduction was agreed to at the United Nations in 2000.

The G7 said an "ambitious outcome from the Doha Development Round [of trade talks] by the end of 2006 is essential for enhancing global growth and poverty reduction."

The group called for a "multilateral rules-based global market" and increased market access in agriculture, industrial services and services; a reduction in trade distorting domestic support and an end to all forms of export subsidies in agriculture.

The G7 also said it welcomed the decision by China "to pursue greater flexibility in their exchange rate regime."

The United States continues to generate more disposable income than its trading partners, Snow said. Yet, he said, it is "striking" how the economies many other countries continue to grow.

During questioning, Snow said "clearly the global economy is changing" and that the matter of expanding the G7 to include such countries as Brazil and Russia is open to further review.

Snow's prepared remarks are available at the Treasury Department Web site.

The IMF and World Bank hold their annual meetings September 24-25 in Washington.

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