Finance ministers from the Group of Seven industralised nations vowed "vigorous" action to reduce global economic imbalances, calling for US budget deficit cuts and reforms in Europe and Japan.
Although the G7 described record oil prices as a "headwind" facing the "robust" global economy, it appeared more concerned about increasingly lopsided international accounts. China's absence for the first time in three meetings meant little progress was made in addressing Beijing's long-standing fixed currency peg to the dollar - seen as a key magnifier of potentially destabilizing trade and financial imbalances.
"Vigorous action is needed to address global imbalances and foster growth," said a statement issued after the meeting, referring to global payments gaps like the shortfall in US trade and financial accounts close to 6 per cent of national income. The statement highlighted the need for a lower US budget deficit, for further structural reforms in Europe and Japan and more budget "consolidation" from Tokyo too.
Despite advance lobbying from the United States for the G7 to lean more directly on China over the yuan, the final statement merely repeated a 14-month-old call for more currency flexibility in regions that required it. China's policy of pegging the yuan to a weakening dollar has been criticized in the United States and elsewhere as tantamount to a subsidy to its already highly competitive exporters.
The success of China's strategy has encouraged other Asian countries to follow suit. Its accumulation of dollars to maintain the peg mean it has banked hundreds of billions of these dollars in US debt securities - exaggerating payments gaps in the process.
The G7 finance ministers and central bankers said economic growth looked healthy even in the face of costlier energy. "The global expansion has remained robust, and the outlook continues to point to solid growth for 2005," said the statement. They said tame inflation, favorable financing conditions and "appropriate" monetary policies in their regions gave reason to hope for continued solid growth.
Ahead of the meeting, many G7 officials said it seemed the world was going to have to learn how to live with oil prices that may remain persistently high. The officials from the United States, Britain, France, Germany, Japan, Italy and Canada failed to agree on how to help the world's poorest nations with the issue likely to be put off until a G8 summit - G7 plus Russia - in Scotland in July.
British officials want to see a final deal by the Gleneagles summit as Britain, which holds the G7 presidency this year, has declared 2005 a crucial year for Africa. The G7 sessions preceded spring meetings of the 184-nation International Monetary Fund and its sister lending institution, the World Bank, that began yesterday and continue today.