WASHINGTON -- U.S. officials said yesterday that they are pleased that the global economic recovery is picking up speed but offered no new measures to keep it going.
Instead, Treasury Department officials stressed that the policies put in place by the United States and other industrial nations seem to be doing the job of putting their economies on sounder footing.
"Our growth is leading the world, and now we're beginning to see that momentum build in Europe and in Japan," Treasury Secretary Lloyd Bentsen said. "Our strategy of deficit reduction here, interest rate cuts in Europe, and fiscal stimulus in Japan is clearly working."
"The problem has shifted from creating the good times to keeping the good times rolling," said a senior Treasury official who joined Bentsen in a briefing for reporters.
Asked about projections that the U.S. budget deficit will begin to turn up again in 1998, Bentsen said, "let us catch our breath. We have already made substantial progress in that regard."
The Treasury officials' comments came as they prepared for this weekend's meeting of finance ministers from the United States and other industrial nations in Madrid, which is also the site of next week's annual meeting of the World Bank and the International Monetary Fund.
A report on the world economic outlook issued yesterday by the IMF underscored the upturn in global growth, which has also been accompanied by higher long-term interest rates in the United States and Europe. The report estimated the global economy will grow 3% this year and 3.5% next year.
The IMF forecast that Germany, which has Europe's biggest economy and suffered a deep recession during unification, will grow 2.3% this year and 2.8% next year. U.S. growth is expected to slow from 3.7% this year to 2.5% in 1995 -- about the pace targeted by Federal Reserve officials.
U.S. policy has been to repeatedly urge Germany to cut interest rates to help revive growth in Europe. Since January 1993, Germany's central bank has trimmed short-term rates to under 5% from 8.5%, and there are clear signs. of recovery in most of Europe.
The improving global economy has boosted long-term interest rates and jolted the bond market. So far, Clinton Administration officials have not expressed alarm, saying the rise in rates reflects improving economic prospects and strengthened demand for credit. They have also argued that inflation remains low, helping to extend the recovery, and that trade imbalances are improving.
Charts distributed to reporters yesterday by Treasury officials estimate that growth in the G-7 industrial nations will increase 2.8% this year-double the 1.4% gain recorded in 1993. Growth next year is estimated to be about the same as this year: 2.7%.
At the same time, administration economic policy has been straggling with tough trade issues that officials believe are essential to sustain growth and create jobs. Bentsen said failure by Congress to approve the global trade agreement would be a "severe mistake."
Chances of congressional action before adjournment dimmed yesterday after Senate Commerce Committee chairman Ernest Hollings, D-S .C., said he would not release the bill to the Senate floor for a final vote.
In addition, U.S. and Japanese authorities face a deadline today to resolve their dispute in time to avert the threat of U.S. sanctions. Bentsen said failure to agree would trigger limited sanctions aimed at Japan's "most egregious trade practices." He added, "I would not anticipate broad-based sanctions."
Lack of a deal is likely to send the dollar lower against the Japanese yen, said David Gilmore, a partner with Foreign Exchange Analtyics. A falling dollar could in turn hurt the bond market.
Meanwhile, Securities and Exchange Commission chairman Arthur Levitt Jr. said the dollar's weakness "is a very serious problem" for U.S. securities markets. He made the comment at a Senate Banking Committee hearing on global financial markets.