G7 pledges to keep stimulus going, despite debt woes (1st Lead)

Feb 6, 2010, 18:28 GMT

Washington/Iqaluit,Canada - Finance ministers of the world's seven leading industrial nations, meeting in a remote part of northern Canada on Saturday, promised to keep up stimulus spending to bolster the global economic recovery despite growing concerns over rising debt in the US and Europe.

Ministers debated the dangerous fiscal conditions of Greece, Spain and Portugal, which have been pushing down global stock markets over the past week.

They also discussed means of recouping billions of dollars in taxpayer funds from global financial firms that were bailed out over the last two years.

'The position for most countries is to support the economies now and get the budget deficit down as the economy recovers,' British Chancellor of the Exchequer Alistair Darling told Bloomberg News.

The meeting of the Group of 7 (G7) near the Arctic Circle in the tiny town of Iqaluit also came as the bloc struggled to find its proper role on the international stage. At a September summit in Pittsburgh, Pennsylvania, the G7 was replaced by the larger Group of 20 (G20) bloc as the premier forum for discussing economic issues.

'The G7 cannot play the role it once did, but it can and it must continue to lead by example in whatever role it will play in the future,' said Canadian Finance Minister Jim Flaherty.

The shift meant there was to be no official communique at the end of the G7 meeting on Saturday. Instead, there was a statement from the Canadian host and a joint press conference of the bloc's finance ministers. Flaherty called it a time for 'frank discussion' about the state of the global recovery.

The G7 ministers kicked off their meeting near the Arctic Circle in Canada Friday with a ride across the icy north on dog sleds. The afternoon ride was aimed at displaying the 'folksiness' and 'back to basics' theme of the gathering advocated by Flaherty.

The two-day meeting included the finance ministers and central bank heads from the worlds' seven leading industrial nations - Japan, the US, Britain, France, Italy, Canada and Germany.

At the top of their agenda in was reform of the global financial system. Ministers have agreed that banks should pay for taxpayer bail-outs that helped keep the financial system afloat over the past two years, but disagreed on the methods.

The finance leaders also considered generous debt relief for the quake-stricken Caribbean nation of Haiti. US Treasury Secretary Timothy Geithner said the group was working to forgive all of Haiti's debt to international institutions, as well as offering grants rather than loans to support Haiti's painful recovery.

Other issues on the agenda: The sluggish global economic recovery; plans to exit from stimulus measures that are pushing up government deficits; rebalancing global growth; and the valuation of China's currency.

Central to the talks on financial reform, which dominated a Saturday morning session, was the problem of banks considered 'too big to fail' and which could again drag the entire financial system into crisis in future.