With the world economy threatened by a US housing meltdown, the dollar at historic lows and global imbalances chafing, global finance chiefs will feel the heat at a gathering that has been in recent years a self-congratulatory exercise. Top finance officials from the Group of Seven wealthy nations are set to discuss the turmoil in markets and the economy ahead of spring meetings of the International Monetary Fund and the World Bank in Washington. The turmoil in financial markets and the weaker outlook for the global economy have cast a pall over the meetings, which in the recent past has allowed officials to mostly pat each other on the back. The IMF confirmed it will lower its 2008 global economic growth forecast by a half percentage point, to 3.7 percent, a significant downgrade due in large part to a US economy teetering on the edge of recession. The ailing dollar and surging euro have put pressure on officials to take action to ease what some say are massive economic imbalances. Japanese Finance Minister Fukushiro Nukaga said: “It is important to reconfirm at the G7 meeting the shared view that excessive movements in the foreign currency market are undesirable for global economic growth.” Japan's government showed concern last month as the yen spiked to 12-year highs against the dollar, putting pressure on Japanese exporters. The yen has since pulled back slightly amid easing worries about global markets. G7 finance ministers, who are due to meet in Washington on Friday, have repeatedly said in the past that foreign exchange rates should reflect fundamentals and that excess volatility is undesirable. The French finance minister, Christine Lagarde, called for “concrete” proposals to deal with financial stability and currency imbalances. The G7 – Britain, Canada, France, Germany, Italy, Japan and the United States – will discuss in particular “the possible impact on the ... economy of the turbulence on the financial markets and how well the eurozone economies are holding up against this turbulence,” a French official told a finance ministry briefing Monday. “It seems there is an international consensus on the need (for the banks) ... to be more transparent on their exposure (to US subprime home loans) ... and on their financial position,” the official said. US Treasury Secretary Henry Paulson, the host of the G7 meeting and a former head of Wall Street titan Goldman Sachs, will lead a discussion “of the causes and consequences of the recent financial market turmoil and how leaders in the private and public sectors are responding to this challenge,” the department said in a statement. The crisis will furnish the IMF, as well as the World Bank, a chance to prove their relevance amid rising doubts. With soaring food prices that are threatening political stability in poor countries, the World Bank proposed last week a massive and coordinated international plan to reduce hunger. “We need a New Deal for Global Food Policy,” World Bank president Robert Zoellick said in a speech Wednesday, referring to a 1930s US government initiative under president Franklin D. Roosevelt that tackled the problems of the Great Depression. Zoellick also called on sovereign wealth funds to invest one percent of their assets in Africa to support development. The IMF, meanwhile, is considering a mechanism used in the private sector to isolate risky assets, related to the US subprime, or high-risk, mortgage crisis, from the rest of the financial system. “What is certain is that the situation is very serious and that the slowdown in the United States, and subsequently in the rest of the world, is a slowdown that is going to be major,” IMF managing director Dominique Strauss-Kahn said. And faced with dwindling demand for its loans, on which the IMF mainly depends, its board on Monday approved the sale of 403 tonnes of gold, valued at an estimated 11 billion dollars, to help fill a budget shortfall. __
