Group of Seven financial leaders assess growth prospects in light of slowdown in U.S. economy

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Against a background of a slowing U.S. economy and continuing weakness in the Japanese economy, the finance ministers and central bank governors of the Group of Seven industrial countries met in Palermo, Italy, on February 17 to discuss recent developments in the world economy. IMF Managing Director Horst Köhler, European Central Bank President Willem F.Duisenberg, and Eurogroup President Romano Prodi of Italy also participated in the discussions. In addition to the global implications of the slowdown in the United States, financial leaders discussed progress made toward strengthening the international financial architecture, implementing the Heavily Indebted Poor Countries (HIPC) Initiative, and finding ways of proceeding beyond debt relief. The ministers and governors also met with the finance minister and central bank governor of Russia and with representatives of the European Commission to discuss recent economic developments in Russia. Below are edited excerpts of the statement issued at the end of the meeting. (The full text is available on the University of Toronto's G-7 website at www.g7.utoronto.ca/.)

Developments in the world economy

Although global growth this year is likely to be somewhat slower than we expected when we last met, the basic factors that have supported sustained growth in many of the major industrial economies remain in place.

We agreed on the need for both macroeconomic and structural policies in all our countries to support growth. In this context, lower energy prices and stable oil markets are important.

We reemphasized our commitment to foster conditions for sustainable growth worldwide.We stressed the importance of continued cooperation among the Group of Seven countries.More specifically:

* In the United States, economic growth has slowed, though economic fundamentals remain strong.Monetary and fiscal policies should aim at supporting sustained growth, while reserving budgetary restraint and price stability and increasing national saving over the medium term.

* In the United Kingdom and Canada, growth remains healthy and unemployment is low,with some signs of a temporary slowing in economic growth. Policies should continue to sustain growth and employment over the medium term,while meeting...