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~ Compliance Contents~
"…we need to pursue balanced macroeconomic policies supportive of domestic demand and investment while preserving price stability."
"In North America, macroeconomic policy should aim at maintaining the conditions for balanced growth."
Canada: Score +1
United States: Score+1
"In the euro area, it is important to pursue an appropriate mix of macroeconomic and structural policies aimed at strengthening prospects for improved growth and higher employment."
"In the United Kingdom, economic policies should continue to aim at fostering non-inflationary growth."
United Kingdom: Score+1
" In Japan, it is still essential to implement stimulus measures until domestic demand-led growth is restored and to peruse structural measures to enhance the economy's efficiency and competitiveness."
The high compliance scores in this report are explained by the very unambitious nature of the macroeconomic commitments made at the Koln Summit. This is not to say that these commitments were not worthwhile or where easily achieved. Rather the commitments undertaken by each G7member were commitments they would have undertaken even without last years Summit. Thus, the desire for balanced growth and above all the avoidance of inflation has for some time been the goal of the North American members of the Seven. The US in particularly has been concerned with this goal, as is clear from the frequent discussion in the US on the state of the economy and the actions necessary for maintaining growth without inflation. The "euro area" has been concerned with its twin problem of low growth and high unemployment even before the decision to launch the euro. The UK, which has to an extent avoided some of the EU employment problems, has, like North America, been concerned with non-inflationary growth. And Japan has been concerned with demand stimulation and structural reform of its economy ever since the Asian crisis.
In addition to this, the commitments are also somewhat vague. It would thus be hard to find non-compliance with the above commitments short of any or all of the Seven experiencing significant levels of inflation or economic decline, the cause of which could be clearly traced to inappropriate short term policies or policy inaction. Indeed it would be hard to imagine the G7 pursuing other that the above mentioned macroeconomic policy commitment.
Report compiled by Ivan Savic and Vladimir Savic
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