G8 finance meeting
June 13, 2009
Meeting in Lecce, Italy, the Group of 8 finance chiefs expressed cautious optimisim about the global economy, but they did note that an increase in unemployment was possible even after production began to rise.
In a communique they noted that they had taken "forceful and coordinated" steps to stabilize the the financial sector but that significant risks remained.
"There are signs of stabilisation in our economies, including a recovery of stock markets, a decline in interest rate spreads, improved business and consumer confidence," the statement noted.
The communique went on to say that the G8 nations will continue to work with others to put the global economy on a strong and sustainable growth path. But that they still had to be cautious.
"We must remain vigilant to ensure that consumer and investor confidence is fully restored and that growth is underpinned by stable financial markets and strong fundamentals," they said.
The group also pledged that there would be more stimulus if needed.
Differences revealed
The meeting did expose differences among the participants.
Germany urged governments to scale back the deficits incurred when governments increased spending during the crisis, while the US government urged everyone to stay the course.
In another display of differences, the US and Canada have been urging the Europeans to subject their banks to US style "stress tests," but Berlin said that that could undermine confidence in the recovery.
However all the finance chiefs did agree that they would have to start looking at ways to unwind the stimulus packages and German Finance Minister Peer Steinbrueck said that he agreed with the International Monetary Fund that it was important to develop credible exit strategies.
"This means we must now think about how we'll go about it once we are getting out of this hole, this valley," said Steinbrueck, adding that this applied to monetary as well as fiscal policy and also to the banking sector rescue efforts.
France warns to remain cautious
The French also urged caution on exiting the steps taken to aide in the global economic recovery.
"We shouldn't get carried away with the recovery while we're still relaunching, stimulating and ensuring that our recovery plans work," said French Finance Minister Christine Lagarde on Friday. "We must be very prudent because the shock was extremely brutal," she added.
The other topics discussed at the meeting were regulatory reform in the G8 nations, further transparency in financial transactions, money laundering and the global financing of terrorism.
Adding to the uncertainty, three of the world's major financial institutions have differing views on the future of the global economy. The World Bank says the crisis in 2009 will be worse than expected, while the International Monetary Fund has upped its forecast for global growth in 2010 to 2.4 percent and the WTO says there are no signs of a trade recovery yet.
The talks on Saturday were to set the agenda for when G-8 leaders meet in July in L'Aquila.
av/Reuters/AFP/AP
Editor: Andreas Illmer