Help us, US asks Japan and Europe
Speaking at the World Economic Forum annual meeting in Davos, Switzerland, Mr Summers said the US government's strong fiscal surplus made America well prepared for any shocks to come.
However, he conceded that the strong US economy couldn't support the rest of the world indefinitely, and he insisted that growth in Europe would be a prerequisite for long-term health in the world economy. "The world economy cannot fly for long on one healthy engine," he said. "It needs three healthy engines, including Europe and Japan."
The strength of the US economy was underscored by data showing that growth surged at the end of 1998. The economy grew at an annualised rate of 5.6 per cent in the fourth quarter, the fastest in two years and well above economists' forecasts.
At a conference dominated by questions about the sustainability of the US boom, Mr Summers's comments were echoed by Al Gore, the US Vice-President.
Mr Gore said the Clinton administration would press for debt relief for poor countries and repeated calls for Japan to boost growth to promote economic recovery at home and abroad. He added that in the administration's fiscal year 2000 budget proposal, to be released next week, President Clinton would push for significant debt relief for poor countries to help ease the pressure of falling commodity prices and recession in some parts of the world.
"We need your help in dealing with this global economy," Mr Gore said, warning that the US could not continue to be "the importer of only resort".
Some estimates see the US trade deficit rising to more than $300bn this year, the biggest ever.
Gordon Brown, the Chancellor, warned world leaders not to allow planned reform of the world's financial architecture so that it can act more effectively in crisis recognition and resolution fall by the wayside.
He urged the Group of Seven to act on the reforms at next month's summit in Germany so they could be put in place by the end of the year. Among the proposals are measures for greater transparency in emerging markets and a common code of standards.
Proposals from Stanley Fischer, deputy managing director of the International Monetary Fund, that the IMF be transformed into a lender of last resort to provide unlimited, though conditional, funds to crisis-hit countries, drew a cool response from the US.
Suggestions that the dollar, euro and yen be made to trade within bands to avoid damaging swings in value, also drew a cool response. Mr Summers said he agreed more stability in exchange rates was desirable, but he was sceptical that more co-ordinated statements from G7 leaders would help. He thought it dangerous "to use monetary policy to achieve an international objective".
Wim Duisenberg, president of the European Central Bank, said the objective of European monetary policy was price stability, not exchange-rate targets.
Jeremy Warner, page 19
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