World economy doing fine, say G8 powers

Potsdam (Germany), May 19: Germany strove to keep its proposals for tighter hedge fund control alive at a meeting of G8 finance ministers today that declared the global economy on track for another year of bumper growth.

''Global growth remains robust and it is more balanced across regions and within our countries,'' said a communique published at the end of a two-day meeting at a lakeside hotel near Berlin.

''Risks for the outlook have abated, but high and volatile energy prices remain a concern and we will remain vigilant.'' The meeting was to prepare a June 6-8 summit of leaders from the G8 -- the United States, Japan, Germany, Britain, France, Italy, Canada and Russia.

US Treasury Secretary Henry Paulson stayed in Washington to prepare talks with China, the rising star of the world economy, highlighting the limits of the G8 as a form of global economic government.

The new French government sent no minister either.

Heat on Hedge Funds

Canadian Finance Minister Jim Flaherty summed up how far the Germans were from garnering critical support for their push for closer supervision of hedge funds, steps they say are needed to ensure the highly-leveraged investment vehicles do not threaten the stability of the financial system in general.

''We're reticent to engage in any sort of top-down regulatory approach and with government getting into direct regulation,'' he told reporters at the G8 meeting place, a lakeside hotel near Potsdam, southwest of Berlin.

Like the United States, Britain and Japan, Canada is keen to avoid any moves to establish formal regulation of the hedge fund industry, which has boomed under loose rules in recent years as investors seek the jucier profits the investment funds' riskier bets can generate.

''There are really two different approaches here. One is the more direct regulatory approach that is advocated by some, but that's not the general view,'' Flaherty said.

Other G8 members like France and Italy have voiced no clear support either for the campaign Germany is waging during its year-long presidency this year of the G7 and G8 clubs, the latter of which includes Russia.

German Finance Minister Peer Steinbrueck vowed yesterday to pursue Berlin's drive for something at least half-way between regulation and the ''light touch'' approach preferred by London, Washington and Tokyo.

''Whether we come to a specific code of conduct by the end of this year or by the end of 2008 is something I don't care about as long as we get there,'' Steinbrueck told a news conference yesterday.

Ministers from Cameroon, Ghana, Nigeria, Mozambique and South Africa were invited to a Friday dinner as part of the German presidency's outreach drive.

The Oxfam charity seized on the occasion, accusing G8 leaders of failing to fulfil promises made in 2005 to raise aid flows to Africa by 50 billion dollars a year.

Reuters>