The new U.S. Treasury secretary, John W. Snow, could hardly have picked a more challenging moment to make his international debut.
As he traveled to Paris at the end of last week to confer with top economic officials of the world's seven leading industrial countries, forecasts for global economic growth were being cut. Transatlantic relations were in crisis over the prospect of war with Iraq. And there was little or no interest at the gathering for joint action to get the world economy moving.
Considering the circumstances, Snow's outing went tolerably well. European officials said the former railroad executive impressed them with his relaxed, genial manner and careful, precise language. The final communique of the Group of Seven meeting reflected Snow's desire to emphasize the need for growth. He had a jovial lunch with his host, French Finance Minister Francis Mer, and both sides said he formed a particularly strong bond with Britain's treasury chancellor, Gordon Brown.
Snow had only mixed success, however, in one of his principal objectives: collecting international support for the Bush administration's tax-cutting budget package. Brown and Italian Finance Minister Giulio Tremonti were supportive. But Snow said he was surprised Saturday when other top Europeans unleashed some unusually public criticism of the widening American budget and current account deficits.
The two American deficits "may create sustainability risks, which in case they materialize would have significant ramifications beyond the U.S.," said Greek Finance Minister Nikos Christodoulakis, who was representing the 15-nation European Union because Greece holds the rotating position of the EU presidency.
"These concerns have not been dissipated by the recently proposed [U.S.] fiscal package," he said.
The Greek minister spoke at a news conference at midday Saturday, hours before the conference ended in the late afternoon. He was joined by European Central Bank President Wim Duisenberg, and their comments dominated much news coverage of the two-day meeting.
The Americans and others griped that Christodoulakis and Duisenberg had issued criticism of the United States in public that they did not make in their relatively brief statements in the closed sessions. Christodoulakis's and Duisenberg's behavior was "a little embarrassing for both sides," said a European official supportive of the criticism.
The criticism did arise briefly in the private meetings, when German Finance Minister Hans Eichel expressed concern about U.S. budget policy. But he did so "in a most mild and non-adversarial way," according to a senior U.S. official.
Britain's Brown and Italy's Tremonti expressed support for Snow's defense that the deficits were appropriate during the current slow phase of the business cycle. France's Mer straddled the issue. He praised the U.S. plan for its "significant objective" of reducing the cost of capital but warned about "writing blank checks against the future."
To some extent Snow was caught in the middle of an internal European dispute over budget policy. The Germans and the European Central Bank assailed the U.S. red ink in part to advance their stance within Europe in defense of austere tax and spending policies.
Snow brought up the U.S. tax and budget proposal in every bilateral meeting with his counterparts here. The G-7 is made up of the United States, Japan, Germany, France, Britain, Italy and Canada.
By several accounts he made a good impression, especially in contrast with his controversial predecessor, Paul H. O'Neill.
"On the whole, we were very impressed with Snow," a European official said. "He has a sort of laid-back style, but I think it goes over well with his colleagues. He's quite a charming man."
In particular, this official said, Snow "chooses his words very carefully." That is in marked contrast with O'Neill, whose outspokenness repeatedly roiled financial markets.
An official from another European country agreed that "relations were warmer with Snow" than with O'Neill. The political and diplomatic standoff at the United Nations, pitting the United States and Britain against France and Germany, did not find an echo at the financial meeting.
"There was no rancor in any of the discussions," Snow said at a briefing.
While some private analysts suggested that the G-7 might have done more to reassure financial markets and business leaders on the eve of a possible war, the U.S. stance was that a war would not necessarily do significant harm to the economy.
U.S. Federal Reserve Board Chairman Alan Greenspan delivered what Snow called a "brilliant, captivating" analysis of oil markets. Greenspan noted that the G-7 economies are only half as dependent on petroleum as at the time of the 1991 Persian Gulf War.
Snow said the market was already adjusting to higher gasoline prices, as "people are driving the small car they own rather than the SUV." He said the fear of war had put a "temporary damper" on stock markets and capital spending, but "an early resolution would be helpful, and there would be a quick market response thereafter."
Neither Snow nor anyone else at the meeting expected much substantive progress on international economic coordination. For some time now, the G-7 has mostly let each country go its own way in economic policy.
"This is a world unwilling to think of coordination. Everybody behaves as if the home front is the only front," said Norbert Walter, chief economist at Deutsche Bank.
He said he missed the international orientation of Clinton-era Treasury secretary Lawrence H. Summers. This is "not truly an internationally oriented administration," Walter said.