Steinbrück won’t see bears on his safari

UK Finance Minister Gordon Brown is renowned in Brussels for not turning up to meetings with his EU counterparts.

This disdain for Ecofin, which used to be (before the creation of the Eurogroup) the EU’s premier economic policy forum, is usually attributed to a combination of pique at his (and the UK’s) exclusion from the Eurogroup and his desire to signal that, unlike Tony Blair, his prime ministerial ‘colleague’, he shares with British voters an antipathy to the EU and the euro and a (correct) judgement that the Ecofin’s glory days are over.

So what are we to make of the decision taken, according to the German news magazine Der Spiegel, by Peer Steinbrück, Germany’s finance minister, not to attend the meeting on Friday 13 April in Washington, of the finance ministers of the Group of Seven (G7), the world’s leading advanced economies? If he had decided to give the day a miss because he is superstitious that would be one thing, but he is actually fulfilling a potentially dangerous engagement on a family holiday watching wild animals in Africa.

It is not as if the G7 session, coinciding with the spring meetings of the International Monetary Fund (IMF) and the World Bank, has nothing to mull over.

Signs that the United States economy is slowing down, perhaps sliding into recession, that Washington is ratcheting up the trade policy pressure on China in a bid to cut the US trade deficit and that the IMF’s high-profile initiative to try to improve global economic policy co-operation has stalled, all suggest that there is plenty on the Washington agenda to make a Steinbrück visit worth while.

The IMF has signalled that it is worried about the threats to financial stability from hedge fund and private equity fund speculation, triggered by low interest rates and easy access to cheap money, which are high priorities for German policymakers.

For Europe - whose heavy hitters were never particularly enamoured of the IMF policy co-ordination initiative - the key issue on the agenda is likely to be the outlook for the US economy, which is expected to slow from 3.3% growth in 2006 to at best 2.4% this year.

The IMF has just published in its World Economic Outlook an assessment of whether or not a US slowdown would hit the world economy or whether stronger growth elsewhere, in Japan, Europe, China, Russia and India in particular, would be enough to bury the old saying that "if the US sneezes, the rest of the world catches a cold".

"How far [can] other countries ‘decouple’ from the US economy and sustain strong growth in the face of a US slowdown?" the IMF asks. Its answer seems to be that, on past evidence, decoupling is possible so long as there is no US recession and that the forces triggering the US slowdown are not at work hitting growth elsewhere. "The analysis suggests that the limited global impact of the current US slowdown so far is not surprising since [it] has been driven by US-specific developments - primarily in housing and manufacturing - rather than by broader factors that are highly correlated across the major industrial countries," the IMF says.

On the face of it, this is quite encouraging given the robustness of the EU recovery which is now under way. But the IMF warns that countries with strong trade links with the US may be hit and that financial market ties (which are very deep across the Atlantic) "play an important role in transmitting [economic] shocks" across countries. It concludes that "the influence of the US economy on other economies does not appear to have diminished".

The German finance minister’s decision to give these IMF meetings a miss certainly looks ill-judged given the issues on the table in Washington, the fact that France is in the midst of elections and the opportunity Germany has, now that its economy is helping to power Europe ahead, of making its (and Europe’s) presence felt.

It also underlines the reality that there is now not much in the way of global economic policy co-operation among finance ministers, something the financial markets will factor into the risks facing the world economy.

• Stewart Fleming is a freelance journalist based in Brussels.

UK Finance Minister Gordon Brown is renowned in Brussels for not turning up to meetings with his EU counterparts.

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