The G7 Summit: Leaders gather to bemoan world recession
Tuesday 07 July 1992
The judgement on the London summit was understood to be the private view of the Prime Minister. In public, John Major admitted that the last summit was too optimistic in predicting a world economic recovery. Even worse, a downbeat outlook for recovery prospects was delivered to summit leaders at their opening session yesterday by President Francois Mitterrand of France.
Anne Lauvergeon, the French summit sherpa, said that all seven leaders believed their populations were morose about economic prospects, and they were at a loss over what to do about this. She added that one leader, whom she would not name but was thought to be Mr Mitterrand, actually cited statistics showing that 92 per cent of economic comment on television was negative, while 60 per cent of the population believed the economy was permanently deteriorating.
British officials felt privately that it was frustrating and embarrassing that world leaders have twice pledged their personal commitment to reach a breakthrough on world trade talks, only to let them lapse into deadlock. All the leaders agreed yesterday that a breakthrough would deliver an upswing in business confidence.
Norman Lamont, the Chancellor of the Exchequer, stressed that a breakthrough in the Gatt (world trade) talks would have a significant impact on the world economy and brighten the trading prospects of the emerging democracies of Eastern Europe and the former Soviet Union.
Britain also worried that its attempt to build up the prospects for recovery at the London summit was a mistake. The British delegation - aware that the Treasury's latest unpublished forecast projects a further fall in output this year - will make no such mistake this time.
President Mitterrand told the summiteers yesterday that they were faced with a 'morose assessment' of the world economic outlook. And Mr Major stated that everyone recognised the importance of growth for living standards and jobs. Unemployment, Mr Mitterrand told his colleagues, was like a 'social gangrene' and unlikely to be significantly reduced by the middling recovery in prospect.
The leaders of the seven richest industrial democracies and Jacques Delors, the President of the European Commission, assembled for their three- day summit only days after the authoritative Organisation for Economic Co- operation and Development (OECD) predicted that even with some growth this year and next, unemployment in the industrial world would stand at 30 million. Mr Major also urged the summiteers to consider structural measures to reduce unemployment, amid predictions that the lacklustre recovery will do little to dent the jobless total.
Both Mr Lamont and Mr Mitterrand underlined the dangers that weak growth in the West posed for Eastern Europe and the new republics of the former Soviet Union. Not only would this limit markets for their produce, it would also curtail the amount of available aid, as budget deficits everywhere are stretched by the impact of the recession.
Mr Mitterrand warned, too, that the Third World could be plunged into political turmoil without an improvement in the world economy, and authoritarian regimes could re-emerge.
The French President concluded that growth was being undermined by high interest rates - a dig at the politically independent Bundesbank which does not attend the summit - budget deficits and the deadlocked Gatt talks.
But holding out a crumb of hope, Mr Lamont told fellow finance ministers that the recent German proposals to rein in its budget deficit could set the scene for lower interest rates across Europe, including Britain.
Mr Major told the leaders that every time Britain had experienced an expansion, most recently in the late 1980s, it had proven unsustainable. This time Britain would ensure that inflation stayed down in the next recovery. It would hold the pound in the European exchange rate mechanism and keep a tight grip on public spending.
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