On February 9-10, 2007, the G7 Finance Ministers will meet in Essen, Germany.

During its presidency of the G7 Finance Ministers forum, Germany will focus on fiscal policy, including "consolidating macroeconomic stabil-ity, the role of hedge funds in the stability of international financial markets, and the quality and sustainability of public finances."[1] The finance ministers will also discuss "the development of capital markets in emerging market economies, the promotion of growth and the fight against poverty by effecting improvements in the public finance sector of developing countries, and fiscal policy for the promotion of energy efficiency and of an energy strategy increasingly reliant on renewable energies."[2] The Ministers will also address "how the international finan-cial institutions IMF and World Bank should adapt to meet changing global conditions."[3]

On February 4, 2007, Reuters News reported that the Finance Ministers will discuss measures to improve bond markets in developing countries, including improving the legal framework, developing collective standards for contracts, and supporting the establishment of supervisory authorities.[4]

On February 3, 2007, Agence France Presse reported that there has been speculation that "There has been speculation that the yen could be included in the final communique to be released at the end of the meeting, which would be seen as an invitation to the Japanese authorities to intervene and prop up their currency."[5] The Chinese yuan, and its lack of flexibility will be discussed.[6]

On February 2, 2007, the Nikkei Report stated that the G7 Finance Ministers are slated to discuss the impact of hedge funds on financial markets (including the need for improved risk disclosure and investor protection), measures to foster bond markets in emerging economies, and the recent decrease in crude oil prices.[7] There is debate between German and Japanese finance ministers over the extent to which the euro's sharp appreciation against the yen will be discussed.[8] The Ministers are also expected to discuss terrorist financing and money laundering.[9] The G7 Finance Ministers will be joined in some discussions by the Plus5 Emerging economies and Russia.[10]

On February 2, 2007, Jiji Press English News Service reported that the G7 Finance Ministers are expected to discuss "ways to nurture debt markets in emerging-market economies."[11] Emerging market economies tent to have underdeveloped debt markets and are vulnerable to unexpected falls in overseas investment.[12] Jiji Press English News Service reported that the G7 Finance Ministers will discuss this issue and "measures to boost the liquidity of debt securities" with representatives from the P5 countries (Brazil, China, India, Mexico, South Africa) and Russia.[13]

On February 1, 2007, the Organisation of Asia-Pacific News Agencies reported that Japanese Vice Finance Minister for International Affairs, Hiroshi Watanabe, told reporters that "We do not believe the yen's depreciation will be taken up as a main topic at the upcoming G-7 meeting."[14] German Finance Minister Peer Steinbrueck, who will chair the G7 meeting, said that they will discuss the yen.[15] Watanabe went on to state that the finance ministers are likely to discuss exchange rates as part of the discussion on macroeconomic surveillance.[16] Vice Finance Minister Hideto Fujii similarly stated that "The foreign exchange rate should reflect economic fundamentals, and excessive volatility and disorderly movements are undesirable."[17] Watanabe also predicted that the finance ministers will confirm solid economic growth in the global economy and financial sanctions for nuclear development against North Korea and Iran.[18]

On January 25, 2007, Market News International reported that a senior G-7 source stated that the weak yen is "a certain cause of concern," but that "it is not Germany's ambition to put currency issues in the center" of the discussion.[19]

On January 12, 2007, Kyodo News reported that "Finance ministers and central bank governors of the Group of Seven industrialized countries are expected to take up the issue of regulating investment funds at their meeting in Germany in February."[20]

On December 28, 2006, Agence France Presse reported that greater transparency of global financial and capital markets, including regulating hedge funds, will "top the agenda" of the G7 finance and central bank chiefs in Essen.[21] According to the article, "Berlin appears ready to scale back its ambitions of drawing up concrete measures, while Washington seems to be coming round to the idea that action could be necessary, especially in the wake of the collapse of US hedge fund Amaranth Advisors."[22] German Sherpa, Bernd Pfaffenbach stated that "One mustn't be too ambitious... You can't simply take an axe to it and want to install rigid rules. That won't happen. But transparency has never hurt anyone. A joint final communique calling for more transparency would be feasible and desirable."[23]

On November 17, 2006, Agence France Presse reported that budgetary discipline will be central to the finance agenda.[24] An official reported that Merkel and the International Monetary Fund will propose a set of fiscal policy guidelines requesting governments to balance their budgets over one economic cycle, and prepare for the costs of aging populations.[25] The German finance ministry aims to put the proposed guidelines on the G8 Leaders' agenda in June.[26] According to the official, initial reactions by G7 partners to the draft guidelines have been positive.[27] The official stated that "This is about raising the quality of public financesÉ When should you consolidate if not now? The question is how do you achieve a sustainable fiscal policy at the global level. The IMF will advise and support us there."[28]

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