Nobody really wants to say this out loud. But in the wake of the Persian Gulf crisis, America's major allies seem to think that the best economic policy for the United States is to fight inflation and accept a mild recession. The wringing-out process would then lay the base for a later, noninflationary expansion.

That's the message behind the weekend communique' of the so-called Group of Seven finance ministers and central bankers. With the notable exception of Treasury Secretary Nicholas Brady, they counseled that the way to fight higher oil prices is to keep interest rates high.

But that translates into higher unemployment and lower business profits -- consequences that President Bush and Brady aren't eager to contemplate as elections draw near. For many months, prior to the Iraqi invasion of Kuwait, they had been pressing Federal Reserve Board Chairman Alan Greenspan, unsuccessfully, to lower interest rates.

Buffeted by the savings and loan crisis, a weak banking system and plunging real estate markets, the American economy was already in a slide. And its problems are now exacerbated by the Middle East crisis perpetrated by Saddam Hussein. For political reasons, Brady doesn't want to use the R-word. But he's convinced that an already sluggish economy is teetering on the edge of zero growth.

In this situation, Brady said after the G-7 meeting that "the job of government is to balance itself so that it can navigate between the two risks {of inflation and low growth}." Therefore, he intends to keep up the pressure on Greenspan and the Fed.

The perspective of foreign governments is different because they -- notably, West Germany and Japan -- are in much better shape than the United States, with smooth-running economic machines. But there is good cause to wonder about reassurances that despite the Persian Gulf crisis and its impact on oil prices, this year's "solid growth" in Europe, Asia and North America "is expected to continue next year, the ninth consecutive year of sustained growth."

This highly optimistic view is based on fairly arbitrary judgments on what happens to the price of oil. The research arm of the International Monetary Fund set the tone: it suggested that the price of oil, $18 a barrel in the weeks before the invasion of Kuwait, would settle back to about $26 in the final quarter of the year, then retreat to OPEC's last announced market price of $21 a barrel. That would be nice, as we look at $38 to $40 oil today.

The IMF forecasters assumed a negotiated settlement by next spring, no hot war, no interference with or destruction of Saudi oil fields. On the contrary, the Saudis and other Gulf producers are expected to make up the 4-million-barrel-a-day loss of Kuwaiti and Iraqi oil.

These assumptions enabled them to project consumer price inflation only one-fourth to one-half point higher this year, with an actual decline next year. Global production could drop from 3 percent in 1989 to 2 percent this year, but turn up to 2.5 percent in 1991. And the U.S. economy, while sluggish, would avoid recession, improving from a 1.3 percent growth rate this year to 1.7 percent next year. So much for Saddam Hussein!

The proposed strategy of the majority of the G-7 -- to worry more about inflation than economic growth -- can't be dismissed out of hand. They cite experience to show that if interest rates aren't reduced in an all-out effort to pump up economic activity, price hikes can be absorbed, and economic growth, in time, will resume. But the question is: In its present condition, can the U.S. economy take the hit?

Greenspan sides with the Europeans. Until an agreement on a budget-deficit package is reached, Greenspan fears that lower interest rates will reignite American inflation and further weaken the dollar, already at an all-time low against major European currencies.

Federal Reserve policy in past years has aimed at keeping economic growth at least at 2 percent of real GNP. That's not dramatic growth. In fact, at that low level, unemployment tends to increase: 2 percent growth used to be called a "growth recession." But we're not managing even that level of growth.

So Greenspan is shifting ground. His testimony last week indicates that he's willing to settle for something less, adopting a new definition of recession that involves a decline that would be "feeding on itself." He thereby abandoned the generally used shorthand for recession -- two consecutive quarters of negative growth. This suggests to me that two consecutive quarters of negative growth may be what Greenspan sees ahead.

But as the economy weakens and financial markets struggle to stifle panic, the problem with this strategy is that a mild recession could easily turn into a deep one from which it would be difficult to emerge.