Finance officials from the Group of Seven industrialized nations have opened weekend talks in Washington facing sharp differences on how to galvanize global growth and attack crippling poverty in the developing world.
Sparking industrial growth globally is a key item on the agenda
Finance ministers and central bankers from Britain, Canada, France, Germany, Italy, Japan and the United States are also worried about the impact on economic momentum this year of stubbornly high oil prices.
German Finance Minister Hans Eichel
Germany's Finance Minister Hans Eichel said the global economic situation looked worse than "half a year ago."
But despite its diplomatic and financial clout, the G7 is essentially powerless to influence energy markets, economists say, especially at a time when the Organization of Petroleum Exporting Countries has little spare capacity and as non-OPEC producers are pumping at near maximum levels.
France has been urging energy conservation and diversity but has so far failed to win much support for the initiative within the G7. A senior French official, asking not to be named, has said the idea has found little favor in the United States and Canada.
"National interests are blocking what we see to be the general interest," he said. "I doubt there will be as ambitious an accord (on oil) as we would like."
US chides Europe
The official also bristled at suggestions by US finance chiefs that Washington's huge current account deficit, a broad measure of foreign trade, is attributable to sluggish growth in Europe and Japan that prevents consumers there from buying US products.
The current account shortfall unnerves US trading partners, as well as the leadership of the International Monetary Fund, because it raises fears that foreign investors will lose confidence in the United States and begin to shun US assets.
That could further weaken the dollar in a disorderly manner, prompting the US Federal Reserve to raise interest rates at a pace that would threaten global growth.
US Treasury Secretary John Snow
Asked by a CNBC television interviewer about Europe and Japan, US Treasury Secretary John Snow replied this week: "They clearly need to grow faster.
"They need to get rid of impediments and obstacles to growth ... Our economy is growing well, four percent for the last two years, over double the growth rate of our trading partners. We are creating a lot of disposable income and we are using it buy goods from our partners. They have to grow faster. That's absolutely certain and that will be my principal message to my G7 colleagues when we meet."
European finance leaders, to their great irritation, have had to endure such lectures before and the French official, speaking before Snow's comments were aired, took issue with the argument.
"It doesn't stand up very well," he said. "If Europe were Germany it would be right. But Europe is not Germany, it's also France, which has a deficit in its balance of payments and strong domestic demand.
This dissatisfaction has been expressed at the IMF where directors, including those from France and Italy, complained that the focus on Europe obscured the need for the US to reduce its consumption and for Japan to boost its economy.
In an interview, Jeroen Kremers, the Dutch IMF director, who represents 12 countries including the Netherlands, said: "Structural reform in Europe would increase growth, and that would be good. But would it help to reduce global external imbalances? That's not so clear.
"Global external imbalances are caused by the US and Asia, not by Europe," he said. "Involving Europe in the call for action to correct external imbalances confuses the issue and has provided an excuse for inaction in the US."
Snow is likely to be told that while Europe may need to make its economies more competitive and market-friendly, the United States is under an obligation to encourage consumer savings rather spending -- particularly on imported items -- in order to reduce its trade deficit and rid the world economy of dangerous imbalances.
Disagreements are also dogging G7 efforts to forge a consensus on easing debt burdens on developing countries that owe an estimated 80 billion dollars to multilateral bodies such as the World Bank and the IMF.
Protesters in Washington
Under a British proposal the IMF would sell some of its gold reserves, which have a market value of about 45 billion dollars, to help it finance debt relief. In addition to Britain, the idea has the backing of France and Germany but faces resistance from the United States.
France however is throwing most of its weight behind its call for an international tax on air travel to finance development assistance.
Treasury sources in Paris have said French Finance Minister Thierry Breton would probably argue for some form of international tax at talks here this weekend. The United States is meanwhile promoting its own initiatives to ease debt burdens and poverty, notably the transformation of World Bank loans into grants and President George Bush's Millennium Challenge Account, which ties assistance to good governance, anti-graft measures and transparency in beneficiary countries.