Economic: The G7 affirms the central economic goal of increasing sustainable growth within the context of a global economy.
Macro: The G7 re-confirms its commitment to price stability and fiscal consolidation.
Micro: The G7 re-confirms the commitment to labour market reform as outlined in the 1994 OECD Job Strategy. The G7 will gather to discuss the topic in more detail at a special Summit on labour markets in September.
The G7 affirms the central economic goal of increasing sustainable growth within the context of a global economy.
Our primary objective was that the Denver Economic Communiqué provide a clear mission statement that would direct policies to promoting sustainable growth in a global context. As described in our statement of objectives, an important ingredient of this was the clear delineation of the appropriate domains of macro and micro economic policy. This is particularly important because of the high unemployment rates, especially in Europe, and the recent calls for government to intervene with stimulative policies.
Denver appears to have met the goal of focusing on sustainable growth within a global context. However, we do not feel that it has adequately met the goal of clearly delineating the boundaries of macro policy. And, in particular, in eschewing macro policy as a tool for output stabilization.
The Denver Economic communiqué has met the objective of affirming the goal of increasing sustainable growth in the context of a global economy. The Economic Communiqué explicitly states sustainable growth as one of the key goals. In Paragraph 3, the Economic Communiqué states that To achieve this goal, we must: implement policies to promote sustainable (growth) But perhaps more important is that the whole tone of the communiqué is consistent with a focus on long-term sustainable growth rather than short-term growth stabilization.
The Economic Communiqué also has a strong focus on the global context. This is immediately evident in Paragraph 2, which states The increasing globalization of markets is an important engine of world growth that provides opportunities to all countries. Our goal is to realize the full benefits of globalization for all while meeting the challenges it presents. The Economic Communiqué also has large sections that which focus on strengthening the global financial system and on building an integrated global economy.
In our statement of objectives, we believed that how the unemployment issue was mentioned in the communiqué would be an important litmus test of how the G7 stood on the use of macro policy as a tool of growth stabilization. Here, we feel that the Denver communiqué has somewhat fudged the issue. This is partially because the issues of inflation, deficits and jobs are only briefly mentioned and then in the opening summary paragraphs. But they are also mentioned in the same breath, as in Paragraphs 3 and 5. Paragraph 5 does mention that More needs to be done to restore sound long-term fiscal positions However, it also states that We are concerned about the high level of unemployment: in some countries which has serious consequences for growth, public finances and social cohesion. And again in talking about countries with a poor labour performance More needs to be done to increase labour and product market efficiency through structural reform.
The G7 re-confirms its commitment to price stability and fiscal consolidation.
The Denver Economic Communiqué only comments on inflation and fiscal policy briefly at the start. Although the Communiqué does re-confirm the commitment to price stability and fiscal consolidation, the language has been toned down from Lyons.
In Paragraphs 2 and 3, the Communiqué refers to the commitment to low inflation and non- inflationary growth. This is not as strong as the Lyons commitment to price-stability.
Similarly, Paragraph 3 of the communiqué refers to the goal of restore(ing) sound public finances while Paragraph 5 refers that more needs to be done to restore sound long-term fiscal positions. This is not as strong as the Lyons commitment to fiscal consolidation.
The G7 re-confirms the commitment to labour market reform as outlined in the 1994 OECD Job Strategy. The G7 will gather to discuss the topic in more detail at a special Summit on labour markets in September.
The Denver Economic Communiqué does mention the labour market job issue but only briefly at the start. In Paragraph 3, it posits job creation as an important goal. In Paragraph 5, it states that . We are concerned about the high level of unemployment in some countries. And again in talking about countries with a poor labour performance More needs to be done to increase labour and product market efficiency through structural reform. Although, the Communiqué does not mention the OECD Job strategy, it does so implicitly by focusing on the need for structural reform rather than on stimulative macro policy. The Communiqué does not mention any invitation to the proposed job summit in September. Although the Communiqué did mention the need for labour and product market structural reform, it did not expand and so fell short of the specifics detailed in Lyons.
Prepared by: Nicholas Staines
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