International currency markets will be looking for reassurances when leaders of the Group of Seven countries meet July 8 in Naples, Italy, that they plan to stick to their promise to reduce inflation and maintain stable prices, Canadian government officials said yesterday.
The official theme of the Naples economic summit is unemployment, but Canada and the other G-7 partners will try to soothe the jangled nerves of international traders who have been giving the US$ a rough ride in the recent weeks, the officials said.
At last summer's Tokyo economic summit, the G-7 countries vowed to reduce inflation and promote economic stability while trying to address chronic unemployment caused by the global recession.
But over the past several weeks, international markets have become increasingly worried about renewing inflation pressures and political instability, especially in Japan. The US$ was pushed to record lows against the yen.
"The markets are looking for re-affirmation of that policy agenda [from Tokyo]," said Scott Clark, assistant deputy minister at the Department of Finance. "The markets will take care of themselves if that re-affirmation comes through."
The "no-frills" summit, as it has already been dubbed after the Italian government scaled back extra events, will concentrate largely on developing strategies to reduce unemployment without inadvertently hurting the economies of other G-7 countries, said Reid Morden, deputy minister of the Department of Foreign Affairs and International Trade.
"You can't have blanket solutions," he said.
The unemployment rate among the G-7 countries averages 7.1%, up from 5.7% in 1990 and ranges from a high of 12.3% in France to a low of 2.8% in Japan. Canada's unemployment rate stands at 10.7%
Forecasts from the Organization for Economic Co-operation and Development suggest the unemployment rate among the G-7 countries, which also include the U.S., Germany and Britain, is slated to decline slowly.
The focus on unemployment comes after the Detroit unemployment summit organized by U.S. President Bill Clinton in March. Also on the three-day agenda in Naples are financial support for Russia and Ukraine. Russian president Boris Yeltsin, who will take part in his first G-7 summit, is also expected to be pushed to do more to stabilize his country's economy.
In recent years, Russian leaders were invited to meet with members of the G-7 after they formally concluded their summit.
But Morden said it is unlikely G-7 countries will be able to offer massive aid programs as they did in the past.
"The G-7 countries do not have as deep pockets as they did in the past," he said.
In Washington, White House National Security Adviser Anthony Lake told reporters Yeltsin will be given a role never accorded a Russian leader.
"For the first time, on the last day President Yeltsin will participate in the discussions of political issues as a real participant," Lake said.
"He was there as a visitor" in the past, Lake said. "Now he is a participant in the formal political discussions on the last day."
Canada is to host next year's economic summit in Halifax.
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