G7 looks for smallest common denominator | Business| Economy and finance news from a German perspective | DW | 26.05.2016
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G7 looks for smallest common denominator

Hosting the G7 meeting, Japanese Prime Minister Shinzo Abe has pushed for a joint multi-billion-dollar investment program to fuel the economy in the leading industrialized nations. DW's Christoph Kober reports.

Prime Minister Shinzo Abe cannot really be blamed for beating about the bush. He demanded that "a clear and strong signal" for economic growth be sent out from the G7 meeting in his country, pointing out that the current situation was indeed alarming and reminiscent of the crisis years in the not-too-distant past.

Abe recalled that commodity prices had dropped by over 50 percent between June 2014 and January 2016, thus marking as hefty a slump as in the time immediately after the collapse of the Lehman Brothers' empire and the ensuing global financial crisis.

That's why the prime minister is seeking support for growth incentives and more investment. In his view, billions of dollars need to be ponied up to kickstart sputtering G7 economies. Only recently, the government in Tokyo agreed on investments in its Asian neighbors with a view to building power stations, hospitals and trains for them and with it create jobs and foster innovation.

Abe's now hoping to lay on a global program with a similar thrust. He wants the G7 countries to shell out $200 billion (179 billion euros) over the next five years mainly for projects in emerging economies.

Different approaches

But the German government for instance has thought little of fueling the economy short-term through boosting public investment. Britain's prime minister hasn't been a big fan of such a policy either. Which is why the G7's previous meeting didn't result in the group agreeing to concerted investment action.

"We were in agreement that the global economy was in a better state than some had predicted a couple of months ago," said German Finance Minister Wolfgang Schäuble, adding there was less reason now to get nervous.

Even a Japanese government spokesman agreed at the meeting that calling the current situation a crisis would be taking it too far, although emerging economies around the globe were going through a difficult phase.

But Shinzo Abe has received some backing from Canada, with Prime Minister Justin Trudeau in the process of realigning the country's economic policy. Trade Minister Chrystia Freeland had indicated earlier that there would be a shift towards more investment, away from a rigid savings policy.

Instability a headache

And what is German Chancellor Angela Merkel's take? Well, she sees the world economy showing signs of stable growth. But there are risks, she acknowledges. Merkel argued low commodity prices had been good news for consumers and some companies. "But today we see a growing degree of instability in the world because of that drop in commodity prices, especially in oil-producing countries, among them many emerging economies."

Kanada PM Justin Trudeau

Canadian Prime Minister Justin Trudeau might turn out to be one of Shinzo Abe's staunchest supporters

The Chancellor was confident a joint economic initiative would be agreed on in Japan, saying it would reflect member countries' willingness to take all monetary measures to support economic expansion. But she did argue that in her view almost all possible steps in this direction had already been exhausted.

US President Barack Obama added that the focus would continue to be on fostering growth, with each nation contributing its bit according to its economic clout. This is probably a far lesser commitment than G7 host Shinzo Abe had hoped for.