G7 finance chiefs discuss safeguarding global recovery

Sep 9, 2011, 16:29 GMT

Marseille, France - The finance ministers and central bank chiefs of the Group of Seven (G7) leading industrialized countries were meeting Friday in the French city of Marseille to discuss ways of preserving the tenuous global economic recovery, amid calls from International Monetary Fund (IMF) chief Christine Lagarde for bold action.

Lagarde was also attending the meeting of finance bosses from the United States, Canada Japan, Germany, France, Italy and Britain, who were also set to discuss the eurozone debt crisis and calls for recapitalization of European banks.

The start of the meeting was overshadowed by the announcement that the top German official at the European Central Bank, chief economist Juergen Stark, would be stepping down nearly three years before the end of his mandate.

Stark is believed to be leaving early in protest over the bank's intervention this summer in the bond market in support of Italian and Spanish government bonds.

The talks come amid growing fears of a slide back towards recession, following disappointing second-quarter growth in the US, Germany, France and other leading economies that have raised questions about the wisdom of austerity programmes.

On Thursday, US President Barack Obama proposed a 450-billion-dollar jobs package to spur hiring and 'jolt' the lagging US economy.

Speaking in London Friday morning Lagarde welcomed Obama's proposals and called for other countries to 'act now - and act boldly - to steer their economies through this dangerous new phase of the recovery.'

She also warned Britain that its draconian deficit reduction approach was 'appropriate' but risky because it was premised on a pick-up in private sector demand which was jeopardised by the subdued economic outlook.

Chancellor of the Exchequer George Osborne defended the programme but agreed that 'policy makers must remain alert to risks.

Meanwhile, US Treasury Secretary called on strong members of the eurozone to give 'unequivocal' financial support to debt-plagued, weaker members of the single currency group.

'It is completely within the capacity of the stronger members of the euro area to absorb these costs,' US Treasury Secretary Timothy Geithner told Bloomberg Television in remarks that appeared aimed at Germany.

The ministers are expected to give commitments that they will take measures to stimulate growth, but are not expected to come up with any common plan.

Germany has ruled out any new shortterm stimulus measures. Germany saying the answer to the debt crisis in the eurozone cannot be to incur more debt.

French Finance Minister Francois Baroin, in an interview Friday with Le Figaro newspaper, said he 'tended to look for what most adapted to each situation.'

The meeting was also set to discuss calls from Lagarde for a recapitalization of European banks.

European governments have reacted coolly to the call, which received a thumbs-up from US officials.