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The Group of Seven (G-7) finance ministers and central bank governors take part in a round table discussion in Chantilly, France. Image Credit: Bloomberg

Chantilly: Group of Seven finance chiefs acknowledged gathering threats to the global economy and gave a cautious pledge to provide fiscal support if those dangers materialise.

After a two-day meeting in Chantilly, France, finance ministers and central bankers declared risks for the global economy remain “tilted to the downside,” even if growth is stabilising and there should be a moderate pickup next year. That’s a later timeline for improvement than envisioned at the Group of 20 summit in Osaka last month.

“Fiscal policy should be flexible and growth-friendly, while rebuilding buffers where needed,” according to a summary of the talks prepared by the French G7 presidency. “Monetary policy will continue to support economic activity, while remaining mindful of financial stability and recognising that monetary policy alone cannot address all economic challenges.”

Confronted with this slowdown, central banks are doing their job. They can’t do everything, that is one of the important messages

- Francois Villeroy de Galhau | Bank of France Governor

The focus on flexibility for governments and limits for central banks echoes a drumbeat in favour of loosening the purse strings in major economies. After years of expansive policy, monetary authorities have lost ammunition, while persistent trade tensions are threatening to weaken momentum further.

European Woes

Europe is suffering from a more marked slowdown as the US economy is supported by a significant budget deficit, Bank of France Governor Francois Villeroy de Galhau said. Within Europe, countries exposed to a trade slowdown are lagging even more.

“Confronted with this slowdown, central banks are doing their job,” Villeroy said to BFM Business radio. “They can’t do everything, that is one of the important messages.”

Finance chiefs avoided having to responding to President Donald Trump’s complaints about the strong dollar and his suggestion that other countries may be strategically weakening currencies. In the summary of proceedings in Chantilly, they simply reiterated commitments previously made on exchange rates, with the aim to support global growth.