Analysis: Finance Chiefs Have Full Plate

Treasury Secretary Henry Paulson, bottom row, second from left, gestures during a group photo of the G-7 Finance Ministers and Central Bank Governors meeting in Washington, Friday, Oct. 19, 2007. Central bank governors pictured top row, left to right: Christian Noyer of France; Axel A. Weber of Germany; Federal Reserve Board Chairman Ben Bernanke; Mario Draghi of Italy; Toshihiko Fukui of Japan. Finance ministers pictured bottom row, left to right: Peer Steinbruck of Germany; Paulson; Tommaso Padoa-Schioppa of Italy; Fukushiro Nukaga of Japan. (AP Photo/Charles Dharapak) (Charles Dharapak - AP)

There also was no meeting of minds on the issue of whether all the credit market turmoil pointed to a need for tighter regulations, especially of hedge funds, the giant pools of cash that are largely unregulated.

The United States wants to keep them that way, declaring that government interference will slow market innovations, while France and Germany have been pressing for increased oversight.

German Finance Minister Peer Steinbrueck said he was pleased to see progress was being made in coming up with proposals for "best practices" for hedge funds although the United States is insisting those practices be voluntary.

Paulson said the G-7 officials, who will continue talks through the weekend as part of the fall meetings of the International Monetary Fund and World Bank, believe the global economy is on the mend.

"The consensus was that markets are better than in August," he told reporters. "It has been slowly improving, but it is going to take awhile."

But in its new forecast, the IMF trimmed its estimate of U.S. growth next year by almost a full percentage point and warned that the prospects for the global economy are "firmly on the downside, centered around the concern that financial market strains could deepen and trigger a more pronounced global slowdown."

If things do get worse, it is entirely possible that the G-7 countries will find the political will to take more forceful actions. But the problem is they may be out of practice because the world economy had been doing relatively well until this year.

"You have oil prices surging to record levels and a global credit crisis and currency volatility," said David Jones, chief economist at DMJ Advisors, a Denver-consulting firm. "It has been a long time since the G-7 has faced this many financial threats."

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EDITOR'S NOTE _ Martin Crutsinger has covered economic issues for The Associated Press in Washington since 1984.