G-7 Seeks to Calm Global Markets, Sustain Rebound

By: Jane Wardell and Martin Crutsinger AP Email
By: Jane Wardell and Martin Crutsinger AP Email

IQALUIT, Nunavut (AP) - Top finance officials of the world's seven major industrial countries pledged Saturday to work to calm global markets and sustain a fledgling economic rebound.

Ending a two-day meeting in the Canadian Arctic, the officials said they would continue to provide government stimulus to support a smooth transition to sustainable growth.

Speaking for the group, Canadian Finance Minister Jim Flaherty said leaders of the Group of Seven major industrial countries also discussed strategies they will use to withdraw stimulus next year
once a stronger rebound is in place.

The meeting occurred as financial markets were roiled this week over fears that a European debt crisis could derail a global recovery from the deepest recession in decades.

Flaherty had chosen the remote town of Iqaluit, population 7,000, where temperatures can dip to 40 degrees below zero in February, to try to promote more informal discussions, which he dubbed fireside chats.

The United States was represented by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke. The G-7 consists of the United States, Japan, Germany, Britain, France, Italy and Canada.

The talks wrapped up on Saturday with discussions on the global economy, banking reform and proposals for more debt relief to Haiti, recovering from a devastating earthquake.

Developments in Europe in the past week provided a reminder that G-7 policymakers still face major hurdles in repairing a broken global economy.

The Portuguese parliament's defeat of a government austerity plan triggered renewed concerns that it and other countries such as Greece and Spain were having trouble tightening budget controls to manage their budget deficits. That could threaten the economic recovery in Europe.

Stocks fell in Asia and Europe, while the Dow Jones industrial average clawed back to a small gain Friday after suffering the largest single-day drop in seven months the previous day on worries about the global economy.

Heading into the meetings, some G-7 nations had expressed unhappiness about President Barack Obama's surprise announcement last month that the United States would seek tougher rules to prevent risky actions by big banks from toppling the entire financial system.

There was more consensus on the need to keep government spending
going this year as a transition until consumers and businesses boost their own purchases.

Obama presented a budget plan this past week that would boost job-creation efforts and raise the U.S. budget deficit to a record $1.56 trillion this year. British Prime Minister Gordon Brown is also stressing government stimulus. Critics point out that the country's budget deficit as a share of its gross domestic product could reach 12 percent this year.

In Japan, where the economy has struggled for two decades, the government unveiled more stimulus spending last week.

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