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G8 summit aims at enhancing confidence in global economy
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The Group of Eight (G8) summit meeting opened in L'Aquila, Italy on Wednesday at a time when the global economy is still in grave difficulties, although the worst time of the recession may be over.

So how to pull the economy out of the recession, the worst since the early 1930s, is one of the major topics discussed at the meeting by the leaders of G8 countries -- the United States, Germany, Japan, France, Britain, Italy, Canada and Russia.

The seven major industrial countries of the G8 entered a serious economic downturn in the last two years with the United States taking the lead. The U.S. economy plunged into recession at the end of 2007, followed by the Euro zone, Japan and Britain in 2008.

Some analysts said that the worst time of the current economic crisis in major industrial countries may be over and the there are some "green shots" of recovery emerging from these countries. That may be true.

For instance, the economic forecast released by the Organization of Economic Cooperation and Development (OECD) late last month showed that the economy of OECD member countries will decline by 4.1 percent this year and increase by 0.7 percent in 2010, better than the forecast it released last March.

However, there is still no enough evidence at present to confirm that the global economic downturn has reached the bottom and the recovery has already started. And the statistics of major economic entities in the first quarter are worrisome.

The U.S. economy declined at an annual rate of 5.5 percent in the first three months of this year, and the GDP in euro countries was down by 2.5 percent in the first quarter comparing with the previous quarter, the worst in its history.

And the Japanese economy plunged at an annual rate of 14.2 percent in the first three months, the worst since the World War II.

Therefore, to enhance confidence in the future of the global economy is the main purpose of the summit meeting when the fiscal and monetary means to spur economy have almost been used out.

The G8 leaders said in a statement that "significant risks remain to economic and financial stability," while "exit strategies" from pro-growth packages should be unwound only "once recovery is assured."

This stance resulted from the fact that some analysts are urging major industrial powers to quit as soon as possible the huge rescue plans released in the past months, because these plans have pushed their fiscal deficit to record highs and increased the risk of inflation, resulting in growing worries over the future economic and fiscal situations.

To deal with the worst economic recession in the past 70 years, the western industrial countries have used every method possible at their hand, including having lowered the short-term interest rates to historical lows to spur the economy. But there has been no clear evidence that the economic recovery has come or will come in the coming few months.

Therefore, the G8 leaders said in a statement that they will continue to work together to restore confidence and set growth on a more robust, green, inclusive and sustainable path.

To stabilize the global financial market and to strictly enforce the financial rules are also main topics of the G8 summit meeting. As the current economic recession resulted from the international crisis originated from the U.S. Subprime mortgage crisis, a stabilized financial market is of greatest and urgent importance for the economic recovery and the prevention of the next financial crisis.

While Italian Prime Minister Berlusconi said a long road lies ahead in trying to get agreement among world leaders on a new framework for global finance, a senior British government official said the meeting would be "an important milestone" between a G20 summit in London in April and a follow-up in Pittsburgh next September.

The summit meeting also stressed the urgency to complete the world trade Doha round negotiation in a bid to revive the global trade and then push for the global economic recovery. The G8 rich nations plus China, India, Brazil, South Africa and Mexico agreed in a communique to wrap up the accord next year, and to have their trade ministers meet before late September to get the talks back on track.

Analysts said that it will help speed the world trade talks and world trade recovery, thus enhancing the confidence in the world economy.

(Xinhua News Agency July 9, 2009)

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