Snow, briefing reporters after earlier meetings with finance ministers and central bankers from the world's richest countries, acknowledged that the head of the International Monetary Fund had criticized him for not reducing the U.S. trade and current-account deficits.
Economic officials from the Group of Seven industrialized nations (France, Germany, Italy, Britain, Japan, Canada and the United States) will be here until Sunday to take part in the IMF and World Bank spring meetings. The global economic outlook and rebuilding post-war Iraq will be the top issues for debate.
But while the IMF's Horst Koehler was critical of some U.S. economic policies, he was even more critical of the two other major economic blocs, Snow said. He noted that Koehler cautioned against economic growth slowing still further in Europe without fundamental structural reform, and Japan's lingering banking problems.
"In a way, we (the United States) got off lightly," Snow said, adding that Koehler's critique came as no surprise. Indeed, IMF chief economist Kenneth Rogoff said earlier in the week if U.S. economic conditions were seen in a developing country, it would sound "warning bells." He argued that U.S. economic policy differs considerably from what the IMF would suggest for countries that were seeking IMF loans.
In a joint statement following their meeting, the G-7 ministers said that "growth in most of our economies has been subdued, though uncertainties have diminished ... we each commit to pursue sound macroeconomic policies that support sustained growth."
The ballooning U.S. budget deficit, coupled with an ever-increasing trade account deficit, an overvalued dollar and open-ended security concerns are all of major concern for economists and investors worldwide, given that U.S. gross domestic product growth accounts for about one-fifth of the world total. And with neither the European nor Japanese economies expected to recover soon, hopes are high that a U.S. rebound will pull up the global economy too.
For 2003, the IMF projects U.S. GDP growth of 2.2 percent, expanding to 3.6 percent the following year. Meanwhile, growth in the eurozone is pegged to be even more sluggish, only 1.1 percent this year and 2.3 percent in 2004. As for Japan, its GDP growth is pegged at 0.8 percent this year, growing only to 1 percent the following year.
Snow, however, stressed that it was necessary for the Japanese and the Europeans to understand that the United States, too, was dependent on their economic recovery to ensure steady growth in U.S. exports and investments.
He shrugged off the IMF's concerns about the rise in the U.S. budget deficit and stated that sometimes it was appropriate to keep spending and incur debt, if the spending could lead to growth in the longer-term. Snow said that incurring a fiscal deficit at a time when the economy was underperforming, as it is now, a "stimulus made sense.
"It's an investment for the longer-term," he said, emphasizing that government deficits in times of slow growth could actually bolster investments and consumption, which would in turn lead to stronger performance in the long run.
Snow did, however, acknowledge that running a deficit at a time when the economy was performing well was not prudent, given that the deficit could lead to higher interest rates.