Finance chiefs from the world's rich nations agreed on Saturday the glo-bal economic outlook had brightened significantly but the threat of further oil price rises was one of the few clouds on the horizon.
Government ministers and central bankers from the G7 economic powers stopped short of recommending action on energy costs, in part because of differences on how severe an impact oil price rises would have on their economies.
"Prospects are favorable and although risks remain, such as energy prices, overall the balance of risks to the outlook has improved," G7 officials said in a communique after their Washington gathering alongside spring meetings of the IMF and World Bank.
PHOTO: EPA
European ministers appeared more anxious than their US counterparts about the threat from oil.
"The principal risk is the oil price risk," said French Finance Minister Nicolas Sarkozy.
His German counterpart Hans Eichel said he hoped planned output cuts by the OPEC would not become a reality.
Concerns were tempered, however, by a presentation to the meet-ing by US Federal Reserve Chairman Alan Greenspan who, according to French officials, explained that precautionary stock building was partly behind surging energy costs.
Still, discussion of the risks could not disguise an overarching contentment with world growth this year that is forecast to come in at its fastest pace in four years.
Not even the noise of thousands of pot-banging, whistle-blowing demonstrators -- angry at the treatment of indebted poor countries by multilateral Western institutions -- seemed to darken the G7 mood.
The ministers sounded more sanguine about the economy's fortunes than they did even two-and-a-half months ago, saying the recovery "continued to strengthen and broaden" since they last met in Boca Raton, Florida, in February.
The G7 -- the US, Britain, Canada, France, Germany, Italy and Japan -- met as key economies like the US and even Japan show persuasive signs of gaining momentum that finance ministers expect to be sustained.
"Beyond the United States, there is also good news," US Secretary of the Treasury John Snow told a news conference. "Japan has turned in several good quarters, as has the United Kingdom."
Snow said growth in Germany and France must be stepped up. European officials acknowledged this lag.
"I explained our analysis of the euro area situation. I confirmed that we had a gradual recovery," European Central Bank President Jean-Claude Trichet told a news briefing -- stressing that the bank had not faced any G7 demands to ease its currently neutral stance on interest rates.
With the dollar's recovery since the Florida meeting pushing foreign exchange down the agenda, the communique stuck to wording adopted in February that warned against excess currency volatility.
The ministers also repeated a call first made in Dubai last September for "more flexibility" in exchange rates -- language seen as referring to China's rigid yuan peg to the dollar.
The dollar, under heavy pressure going into the Florida meeting, has partly recovered and this has clearly come as a relief to G7 participants that export to US markets.
"It is not clear whether there was a link, like the cause and effect, on foreign exchange since the statement of the G7 in Boca Raton. But all in all, G7 and Italy consider positive the development of foreign exchange since Boca Raton," Italian Economy Minister Giulio Tremonti said.
Energy prices were not the only danger sign on official radars over the weekend. Last week, the IMF warned about the potential impact of higher US interest rates, now considered inevitable.
Bundesbank Vice President Juergen Stark told reporters: "There are signs that the present situation of globally low interest rates does not necessarily have to persist."
Snow conceded the recovery would likely generate some moderate inflation pressures but in general "we look at a fairly benign cost outlook."
The G7 members agreed to work for "sustained medium-term fiscal consolidation" as growth picks up.
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