EDITORIAL: Face up to war's risks - G-7 finance ministers tread lightly on Iraq effect.
As the tense situation involving Iraq casts a shadow over the world economy, finance ministers and governors of the central banks of the Group of Seven (G-7) key economic nations have concluded their meeting in Paris.
In their joint statement, the ministers said, Geopolitical uncertainties have increased'' and If the economic outlook weakens, we are prepared to respond as appropriate.'' In other words, ``geopolitical uncertainties'' means there is no telling what will happen to the world economy in event of war against Iraq.
The ministers should have just come out and said so plainly. But in diplomacy, a clear rift has emerged with the United States and Britain on one side and France and Germany on the other. The finance ministers must have sought to close ranks on economic issues, and their joint statement was worded to demonstrate their restraint.
Before the G-7 finance meeting began, French Finance Minister Francis Mer, the chairman, said it was not up to the finance ministers to decide whether there is to be a war. Of course, any decision on war would be made by the respective leaders of each country. But the impact of a war on the global economy is an important factor to be weighed in making such a decision.
All the big nations of the world face economic difficulties. In the United States, where personal consumption and capital investment have both started to decline, the ``twin deficits'' in federal budget and foreign trade have been growing. Japan has long struggled under deflation and the burden of bank nonperforming loans, with no way out of the slump so far. Among European nations, exports have fallen off because of the strength of the euro, and the German economy is still in the doldrums.
Oil prices stay at a high level because of the general strike in Venezuela, as well as the Iraq situation. And stock prices continue to be sluggish in all major markets.
What would a war add to these circumstances? In part, the answer depends on how long a war might last. But oil prices would quite likely rise and the global economy would be seriously affected by war. If the danger of terrorism is increased in the aftermath of war, the movement of people and goods would be restricted, and world trade could be curtailed as a consequence.
While the dollar used to be regarded as a strong currency in an emergency, it is now sold off in times of uncertainty. If the value of the dollar plunges, the economies of many countries that earn dollars from exports to U.S. markets could be caught up short.
The most important item on the agenda before the finance ministers meeting in Paris should have been the potential risks to the world economy in event of war. They should have discussed such issues in the meeting and reported the outcome to their leaders.
Bill Clinton defeated incumbent U.S. President George H.W. Bush in 1992, when there was still a lingering mood of America's victory over Iraq in the Persian Gulf War, on the slogan, ``It's the economy, stupid.'' Even if the United States wins a new war against Iraq, the American people will reject the George W. Bush administration if the post-conflict economy falters.
The same holds true of Japan, which has expressed its support for the U.S. position on taking military action against Iraq. Many people would like to ask Prime Minister Junichiro Koizumi, ``Mr. Prime Minister, will the nation's economy, already in trouble, be all right if a war breaks out against Iraq?''
The message coming out the the Paris G-7 meeting was simply a chanson that only adds to the anxiety of those who hear it.
--The Asahi Shimbun, Feb. 24(IHT/Asahi: February 25,2003)