G7
finance chiefs discuss growth risks, urge deal on Greece
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[May 28, 2015] By
Gernot Heller and Paul Carrel
DRESDEN, Germany (Reuters) - Finance chiefs
from the Group of Seven economic powers met on Thursday to discuss how
to revive a faltering global recovery, with the United States leaning on
Europe to reach a deal to avert a Greek bankruptcy.
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The threat of a Greek default, rising oil prices and bond market
turmoil are fuelling investor nervousness about an unwinding of the
global economic recovery. A slowdown in China -- not present at the
talks in Dresden, Germany -- is adding to the concern.
Speaking before meeting the Group of Seven finance chiefs,
International Monetary Fund Managing Director Christine Lagarde said
there was still a lot of work to do before Greece and its
international lenders could clinch a cash-for-reforms deal.
"We are all in the process of working towards a solution for Greece
and I would not say that we already have reached substantial
results," Lagarde told German television station ARD in comments
translated from English to German.
"Things have moved, but there is still a lot of work to do," she
noted, adding that she believed Greece would fulfil its commitments.
G7 sources said officials from the member countries -- hosts
Germany, the United States, Japan, Britain, France, Italy and Canada
-- were speaking "in different formats all the time" about Greece at
the Dresden meeting.
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Athens and its EU/IMF lenders have been locked in tortuous
negotiations on a reform agreement for four months. Without a deal,
it risks default or bankruptcy in weeks.
Greece's government said on Wednesday it was starting to draft a
deal with creditors that would pave the way for aid, but European
officials quickly dismissed the idea that the talks had reached such
a stage.
On the eve of the G7 meeting, U.S. Treasury Secretary Jack Lew urged
international creditors to show more flexibility. He said he feared
a miscalculation could lead to a new crisis which could have
consequences for the wider world.
The differences over Greece follow a growth-versus-budget
consolidation debate between the United States and Germany at G7
level.
GROWTH CHALLENGE
Meeting under the heading "Towards a Dynamic Global Economy", the G7
finance ministers and central bank chiefs began discussing economic
reforms to increase their competitiveness.
But volatile markets, sensitive to differing growth paths between
economic regions, risk derailing their efforts.
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In Frankfurt, ECB Vice President Vitor Constancio said a sell-off in
financial markets that derails the euro zone's recovery was the
biggest risk to the bloc's financial stability. ECB President Mario
Draghi is taking part in the G7 meeting.
Constancio spoke following a slump in Chinese stocks after several
major brokerages tightened requirements on margin financing.
Bank of England Governor Mark Carney, who also chairs a global body
of bank regulators, was due to update the G7 finance chiefs on
progress towards a new code of conduct for bankers and other changes
to the way financial markets are overseen after recent scandals in
global currency and interest rate markets.
A G7 source, speaking on condition of anonymity, said the finance
chiefs would discuss new instruments for generating sustainable
growth once monetary and fiscal policies have reached their limits.
Another topic was clamping down on tax evasion. A German delegation
source said the ministers were determined to stick to an end-2015
deadline to implement an action plan for tackling the way
corporations shift profits from one country to another in order to
reduce tax.
"It's now about a question of credible implementation ... so that we
don't see ... companies around the world that don't pay any tax,"
the German source said, adding that G7 officials also wanted to
think about how to tackle disputes over which country profits are
taxed in.
(Additional reporting by Michelle Martin, William Schomberg, David
Ljunggren and Frank Siebelt; Editing by Hugh Lawson)
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