Finance chiefs of the world's top economies met on Saturday to brainstorm their response in case a war in Iraq makes matters worse for ailing world growth, with interest rate cuts probably their first line of defence.
Putting to one-side divisions between Group of Seven leaders over a possible war in Iraq, the Paris talks will mainly focus on how to prevent any war-related spike in oil prices from wreaking havoc on an already battered global economy.
Ministers will express their confidence in the "resilience" of the world economy but acknowledge that "geopolitical" tensions were taking their toll, according to an extract of the draft of their communique seen by Reuters.
"Our economies are experiencing slow growth...we remain confident," the introduction to the draft extract read.
Japanese Finance Minister Masajuro Shiokawa, speaking after a breakfast meeting with US Treasury Secretary John Snow, said that Washington would do its best to lift growth and Tokyo should do its bit as well.
"He (Snow) said he truly believed that the United States and Japan must work together, or else the world economy would not get better."
"He said that they (the United States) will make efforts on their end and that he wanted Japan to also revitalise its economy," Shiokawa told reporters after the bilateral meeting in a Paris hotel before the formal G7 talks got under way.
But with G7 governments from the United States, Japan, Canada, Germany, Italy and Britain already strapped for spare cash, attention will fall on their central bank chiefs and their assessment of the chances for further monetary easing.
US officials said newly appointed Treasury Secretary John Snow, attending his debut G7 meeting, will tell the group that existing US tax cut and spending plans are already aimed at lifting world growth. European ministers are expected to explain how EU budget rules limit their scope for more spending.
"Were things to slow, there are things we can do on monetary policy," a senior Canadian government official said on the margins of the Friday G7 session. The ministers dined together on Friday ahead of Saturday's formal talks at the fortress-like finance ministry building on the Seine river banks in Paris.
What room on rates?
US, UK and Canadian interest rates have already been cut to more than 40-year lows and Japanese rates have been close to zero for years. The European Central Bank also lowered rates last year but has faced criticism from many officials and experts for not being as aggressive as the US Federal Reserve.
Avoiding war splits
French Finance Minister Francis Mer, hosting the meeting, stressed the talks would not be upset by diplomatic tensions over French and German resistance to US calls for military action against Iraqi leader Saddam Hussein.
"We're not deciding here whether it's war or not -- I'm not indifferent about that issue but it's not our job," Mer said in an interview on France 2 public television channel.
The OECD think-tank sees global growth of a little more than two per cent in 2003, and a G7 source said on Friday the International Monetary Fund had cut its 2003 world growth outlook to 3.3 per cent from 3.7 per cent.
"We will try to see together what we can do to restore confidence," Mer said.
