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G-7 agrees to push economic recovery but deals U.S. a setback on trade


NAPLES, Italy -- Describing the toll of unemployed in their countries as an "unacceptable waste," leaders of the Group of Seven leading industrial democracies agreed yesterday to pursue policies to keep a nascent economic recovery on track, encourage growth and create jobs.

Then, joined by President Boris N. Yeltsin of Russia, they turned to global political problems, though their talks were overshadowed by the death of the president of North Korea, Kim Il Sung, and uncertainty about his country's plans to develop nuclear weapons.

Although the economic talks produced a pledge that the leaders would "continue the momentum of trade liberalization," President Clinton had to retreat from a proposal to immediately begin a review of trade barriers in the hope of presenting an agenda at similar talks next year in Halifax, Nova Scotia.

Mr. Clinton, who is trying to shore up his international policy credentials on his European trip, had committed his prestige just 11 days ago to acceptance of the proposal.

But France, supported by Britain and Germany, objected that new trade proposals would only make it more difficult for each country to ratify the sweeping accord reached in December under the General Agreement on Tariffs and Trade.

Surprised and embarrassed, administration officials said later that they had thought other countries would give more support to the proposal. France has not yet ratified the trade agreement; Germany did so Friday.

Mr. Clinton said he felt good about the talks despite the setback, in part because the leaders had agreed to discuss next year what financial and political institutions were needed to meet the challenges of the next century.

The Group of Seven consists of the United States, Japan, Britain, France, Germany, Italy and Canada.

Of the immediate problem of the decline of the dollar against the yen and the German mark, the leaders said not a word, perhaps out of fear of driving it down further, as Mr. Clinton did when he talked about the dollar here Friday.

Nor did they say anything to indicate whether central banks would buy large amounts of dollars to try to halt or reverse the dollar's slide, something the Europeans say would be futile anyway until nervousness on the capital markets fades.

"We shared the objective of a strong dollar," said Treasury Secretary Lloyd Bentsen. But he said he refused to "telegraph" what the Federal Reserve Bank would do.

The seven leaders said they would encourage "stronger cooperation between our appropriate authorities to respond to the growing integration of the global capital markets" and insisted that nothing fundamental was wrong with their economies.

"Inflation is now at the lowest levels in over three decades and the conditions are in place for strong and lasting noninflationary growth," their communique proclaimed.

In their communique, the seven heads of government said, however, that "unemployment remains far too high, with over 124 million unemployed in our countries alone."

"This is an unacceptable waste," the statement said. "We will build on the present recovery by accelerating reforms so as to improve the capacity of our economies to create jobs."

Prime Minister Tomiichi Murayama of Japan was not among his colleagues yesterday in the meetings at the 18th-century Royal Palace, across the blue bay from Mount Vesuvius. Summer heat was described as one reason he was taken to a hospital Friday night, suffering from diarrhea and dehydration.

His spokesmen said Mr. Murayama hoped to join political discussions today, the final day of the summit talks.

Before Mr. Yeltsin joined the group for dinner last night, the leaders agreed to help Russia join the global trade agreement and to continue to provide financial underpinning for economic reform.

The seven nations offered Ukraine $200 million, in addition to $100 million previously offered by the European Union. They also offered an unspecified amount of loans to close the Chernobyl nuclear power plant, part of which exploded in 1986, and replace with three safer reactors.

Chancellor Helmut Kohl of Germany, which joined France in proposing the Chernobyl aid package, pronounced himself satisfied, calling the unsafe reactor "a ticking time bomb."

The seven leaders also offered Ukraine up to $4 billion of aid from international institutions over the next two years if it begins converting state-owned industries to private ownership, as Russia is doing.

For the most part, the leaders seemed to be in a self-congratulatory mood. Though their host, Prime Minister Silvio Berlusconi, may have been upset by word that his brother will stand trial on corruption charges, he seemed buoyant after Italy defeated Spain, 2-1, in yesterday's World Cup match in Foxboro, Mass.

Neapolitans had been told not to stream into the streets to celebrate because of security measures, but they disregarded the instruction with gusto, filling the streets on motor scooters and tooting air horns.

Mr. Clinton was also upbeat. "I was struck by the degree to whichthe vision and the goals of the United States are shared by our partners," he said.

One thing they agreed on, he said, was to discuss in Halifax "what we want the world to look like 20 years from now."

"We are still working with the institutions that we settled on at the end of World War II," Mr. Clinton said.

"Are they adequate for the problems we face today and tomorrow? And if not, how do we need to change them?"

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