The G8 summit will have little lasting impact, writes Cliff Taylor, Economics Editor
If George Bush is asked when he returns to Washington what he achieved at the G8 summit he might answer: "I added a cent to the US dollar." Comments by the US president in favour of a "strong dollar" led the currency to bounce - temporarily - on the foreign exchange markets yesterday.
However there is little sign that the summit leaders had serious discussions on the dollar, or that significant progress was made on other key threats to world growth. Unless they can pull a rabbit out of the hat for the final communiqué today, the impact of their "message of confidence" that "all conditions" are in place for world economic recovery will fizzle out as quickly as yesterday's dollar bounce.
The final communiqué will be closely watched for any comment on currencies. There is a belief in the markets that, despite its talk of support for a "strong" dollar, the Bush administration is quite happy to see the currency slide, in the hope that this will boost US exports and growth in the run up to the 2004 election.
Mr Bush's spokesman, Mr Ari Fleischer told reporters at Évian : "The President's position is that the United States supports a strong dollar and a strong dollar is determined by the market and that's why it is important to secure policies that advance growth in the United States." The key point the markets will take from this is that the administration believes that the dollar's value should be set by the market, meaning no central bank intervention to support it - and thus offering no real support for the currency.
The flip side of the weak dollar is the strength of the euro, which hits euro zone exporters and threatens to further slow growth in the EU, or even push Germany into a period of deflation, or falling prices. A malign view of US policy is that the administration is shedding no tears for Europe's problems, feeling that the EU should do more to spur growth through cutting interest rates and economic reform.
Referring to this, the European Commission president, Mr Romano Prodi, quoted Mr Bush as saying : "I shall not use the monetary weapon." But this does not mean that the US will step in to prop up the dollar either, meaning that Mr Bush will do nothing to disarm this weapon of European economic destruction.
One measure to spur European growth would be lower interest rates and these may finally be on the way. While the European Central Bank is independent, "there is possibly still room here to stimulate growth", commented Mr Gerhard Schröder, the German chancellor at Évian, in as clear a signal as possible to the bank that its political masters expect a rates move at this week's ECB council meeting. However the extent of economic weakness in the big EU economies means there will be no quick pick-up; yesterday French unemployment figures showed a jobless rate of 9.3 per cent and the German rate is approaching 11 per cent.
While the G8 appears to have spent limited time discussing currencies, the leaders did issue a statement on trade, committing themselves to completing the current trade talks - the Doha round - on schedule by the end of next year. However beyond the usual platitudes on the importance of free trade, the statement did not point the way forward in the key areas now blocking the talks: the row over agricultural subsidies, particularly the EU's export subsidies; the US block on agreement over moves to allow poorer countries to import cheap generic drugs to combat disease; and a series of damaging trade rows, most recently the US-led attack through the World Trade Organisation on the EU's restrictions on genetically modified foods.
The Doha round has been effectively stuck since negotiators missed an end of March deadline to agree a way forward on agricultural trade. The G8 leaders have not produced anything to break this deadlock, beyond a commitment to make progress before a key review meeting for the talks due this September in Cancun, Mexico. If these words are not matched by action in the weeks ahead, the derailing of the talks could further damage already fragile economic confidence.
Among the strongest critics of the trade statement were aid agencies, who are calling on the leaders to deliver on their promise to make the Doha talks a "development round", which benefits poorer countries most. Lack of progress on cutting agricultural subsidies, which give EU and US exporters an unfair advantage on world markets, on opening developed markets to poorer countries and on overcoming the objections of the US to the widespread provision of generic drugs suggest that the same old vested interests are blocking progress.
While the leaders have committed money to fighting AIDS, there is no sign of wider progress on trade issues vital for developing countries or on the various proposals to accelerate debt relief.