Inflation, war in Ukraine draw the focus of G7 finance leaders
U.S. treasury secretary says sanctions on Russia could generate blowback
‘‘ The message was that we stand behind Ukraine. We’re going to put together the resources that they need.” U.S. TREASURY SECRETARY JANET YELLEN
Finance ministers for the Group of Seven leading economies grappled Thursday with deepening inflation concerns and the immediate effects of Russia’s war in Ukraine, with U.S. Treasury Secretary Janet Yellen promising that the allies would put together enough additional aid to help Ukraine “get through this.”
“All of us pledged to do what’s necessary to fill the gap,” Yellen said as the ministers finished their first of two days of talks. “The message was that we stand behind Ukraine. We’re going to put together the resources that they need.”
Yellen warned, though, that it all adds up to a “very difficult economic situation,” with ongoing sanctions against Russia that could generate some blowback for the U.S. and its allies, causing higher inflation worldwide. The risk of high inflation is that it could lead to slower growth and a broader downturn — a sign that the events kickstarted by Russian President Vladimir Putin’s invasion of Ukraine could have repercussions far beyond the front lines of the fighting.
Yellen took note of “not only supply shocks that we’ve had, but with the war continuing and with sanctions continuing to be applied, we may face more inflationary risks to the global economy.”
Beyond high inflation, the finance ministers meeting in Koenigswinter, Germany, are confronting a refugee crisis, food insecurity exacerbated by the war, climate change and the ramifications of a multiyear pandemic.
German Finance Minister Christian Lindner, the meeting’s host, told reporters ahead of the meeting that Ukraine will likely need “a number of double-digit billion euros” over the coming months. He said Germany pledged one billion euros in grants and expected “further progress” during the meeting.
As the ministers were meeting in Germany, the U.S. overwhelmingly approved its own $40 billion (U.S.) infusion of military and economic aid for Ukraine and its allies.
Food insecurity also has been a major topic even before the meeting began. The U.S., several global development banks and other groups rolled out a multibilliondollar plan Wednesday to address the danger facing an increasingly fragile world economy.
Russia’s invasion of Ukraine has produced a sharp increase in food and energy prices that is contributing to a slowdown in growth and threatening global stagflation — when inflation and unemployment are high and economic output is low.
The two countries are huge exporters of wheat, barley and sunflower oil, with interrupted food and fertilizer supplies raising already high prices and threatening food insecurity in Africa, the Middle East and parts of Asia.