G-7 Prepares to Greet Yeltsin as Jobs, Dollar Top Agenda

WASHINGTON -- Leaders of the world's seven richest industrial countries gather in Naples this week for their annual summit, searching for solutions to record global unemployment and the downward spiral of the dollar. For the first time, the Western leaders will greet President Boris Yeltsin as a fully fledged political partner to discuss the world's trouble spots from Bosnia to North Korea. The summit sessions will get underway with a dinner Friday night at an ornate Italian palace, turn to discussions about the economy Saturday and conclude Sunday with a meeting with Yeltsin.While German Chancellor Helmut Kohl campaigned to make Russia a full member of capitalism's most exclusive club, other nations balked. As a compromise, Yeltsin will be invited to take part in the group's political discussions Sunday and have a hand in drafting a final chairman's statement. Last year in Tokyo, U.S. President Bill Clinton cajoled the other Group of Seven nations into supporting an ambitious assistance package for Russia. But this year, the best Yeltsin is likely to get is slightly expanded borrowing rights from the International Monetary Fund, which along with the World Bank is supplying the bulk of Western assistance to Russia. The IMF increase is likely also to be offered to Ukraine, which is in even worse shape economically than Russia. The G-7 is also considering ways to aid Ukraine in shutting down the remaining nuclear reactors at Chernobyl before another disaster spews radioactivity all over Europe. For all the problems, the results from this year's summit of the G-7 countries -- the United States, Japan, Germany, Britain, France, Canada and Italy -- are expected to be quite modest.That is because many of the leaders are in political trouble at home and in no mood to make the kind of concessions necessary to forge a global consensus. Three of the leaders -- Japan's Tomiichi Murayama, Canada's Jean Chretien and Italy's Silvio Berlusconi -- will be at their first summits, having won their jobs in part by attacking the economic mismanagement of their predecessors. The economic summit is occurring at a time when all the G-7 nations are expected to be out of recession, something that has not occurred since 1989. But the long period of economic doldrums has taken its toll. Unemployment in the industrial world, even with growth picking up, is forecast to hit a record 35.3 million this year. For that reason, jobs will be a primary topic at Naples. But the leaders are not likely to come up with any miracle solutions. Rather, they are expected to repeat the promises made at a Detroit G-7 jobs conference in March to address such problems as worker retraining in the United States and the high costs of hiring new workers in Europe. For Clinton, the problem of low approval ratings is especially vexing because the U.S. economic recovery is finally taking hold. Since he took office, the economy has created 3.5 million new jobs and U.S. growth has been the fastest of any of the G-7 countries. But that good growth is threatened by a soaring U.S. trade deficit and a sharp slide in the value of the dollar that has unsettled financial markets around the world. The dollar's weakness has been blamed in part on the trade gap. With the United States unable to achieve significant market-opening agreements that would narrow a $59.3 billion trade deficit with Japan, currency traders have been bidding the dollar lower in the belief that a weaker U.S. currency is the only way out of U.S. trade problems.A weaker dollar makes U.S. products more competitive overseas but it also raises serious risks of destabilizing U.S. financial markets if worried foreigners start cashing in their dollar-denominated stocks and bonds. The Japanese are, if anything, more upset about the dollar's weakness against the yen because it threatens to price their products out of overseas markets. While Clinton had hoped to relieve pressure on the dollar by getting Japan to sign new market-opening trade agreements in Naples, the current political turmoil makes that highly unlikely. Murayama, 70, a Socialist, is Japan's fourth prime minister in the past year and his party has often railed against U.S. strongarm tactics aimed at opening Japan's markets. While some economists say the dollar's troubles amount to a global vote of no confidence in the Clinton administration, others blame Japan's political turmoil for actually making the Japanese currency stronger. They believe markets have lost confidence in Japanese government doing anything to reduce a record $131 billion trade surplus. In pre-summit interviews, U.S. Treasury Secretary Lloyd Bentsen said interest rate cuts in Germany and Japan would help growth prospects. Lower rates in those countries could boost the dollar, especially if accompanied by a rate hike by the Federal Reserve.But Japanese and German officials, worried about inflation threats, gave no hint that any such coordinated move on interest rates would come out of Naples.