Common Dreams / Published on Saturday, February 5, 2005 by Agence France Presse
A US-Europe rift threatened to torpedo a British-led initiative to tackle global poverty as finance ministers from the Group of Seven rich nations began formally meeting here.
Aside from struggling to agree on ways to ease developing country debt, finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States were to take another shot at persuading China to ease its dollar-pegged currency policy. But market analysts have said the effort is unlikely to bear fruit.
Meanwhile in a statement to be issued later Saturday, finance ministers will characterize excessive volatility on currency markets as "undesirable" for economic growth, adhering to language used in a communique drafted one year ago, a European source said here.
They were to call also on oil producing countries to increase oil output and consumers to raise energy efficiency, a source close to the matter said.
But the focus Saturday was on developing country debt amid deep divisions and deadlock on how to stamp out global poverty despite a vibrant personal appeal for action by former South African president Nelson Mandela.
Ministers met at the home of British Chancellor of the Exchequer Gordon Brown early Saturday after failing to reach common ground on development aid during a working dinner the previous night and as their deputies took up the baton into early Saturday, European officials said.
Ministers had Friday met with Mandela who urged them to back a doubling in annual development assistance to 100 billion dollars and to approve 100 percent debt cancellation for Africa.
"I urge you to act tonight, do not delay when poor people continue to suffer," Mandela said.
But in subsequent talks, according to German secretary of state for finance Caio Koch-Weser, "the Americans (were) in a completely different frame of mind from the Europeans."
Under discussion was an ambitious scheme proposed by Britain that would fund a package of financial assistance of up to 100 billion dollars a year and provide debt relief and trade benefits.
US Undersecretary of the Treasury John Taylor said here Friday that the plan "doesn't work" for the United States.
US officials have cited legal problems in connection with the plan, known as the International Finance Facility (IFF), and have pointed to their own proposals for debt cancellation and the transformation of World Bank loans into grants.
Britain looked to put on a brave face Saturday, with International Development Secretary Hilary Benn saying he believed a solution would be found, with or without the backing of the Americans, when G7 leaders plus Russia meet for a Group of Eight summit in Gleneagles, Scotland in July.
"You don't need everybody on board to launch the IFF," Benn told the BBC.
"One way or the other, what is inconceivable is that the world will come to Gleneagles ... without having found ways of raising the additional money that we know is needed to save children's lives and to give developing countries the helping hand they need as they help themselves out of poverty," he said.
France and Germany were meanwhile expected to announce their own development initiative here if disagreements within the G7 persist, a European source said.
Failure of Britain's plan would be a personal setback for Brown and British Prime Minister Tony Blair, who intended to use Britain's presidencies of the G7 and G8, the Group of Seven plus Russia, this year to push for a scheme delivering full debt cancellation, trade benefits and financial assistance for the world's poorest countries, notably in Africa.
G7 finance chiefs were meanwhile set to voice no change on its currency position from a year ago, when after meeting in Boca Raton, Florida in early February 2004, they concluded that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth."
The Boca Raton statement, expected to be repeated here Saturday, also stressed that "more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility."
That paragraph was seen as targeting China, which has resisted moves to allow its dollar-pegged currency to appreciate. US and European officials maintain that the Chinese yuan is undervalued, giving Beijing's exports an unfair advantage.
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