G7 finance chiefs vow to safeguard global recovery

Sep 10, 2011, 1:31 GMT

Marseille, France - Finance ministers and central bank chiefs of the leading industrialized countries vowed to preserve the tenuous global economic recovery, amid calls from International Monetary Fund (IMF) chief Christine Lagarde for bold action.

Lagarde was attending the meeting in Marseille, France, 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 Group of Seven (G7) meeting was overshadowed by the announcement Friday that the top German official at the European Central Bank, chief economist Juergen Stark, would step 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 to prop up Italian and Spanish government securities.

The G7 ministers vowed to make strong efforts to preserve financial stability, restore confidence and support economic growth.

The Marseille talks continue Saturday with Russian officials joining, and come amid growing fears of another recession following disappointing second-quarter growth reports in the US, Germany, France and other leading economies.

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

Speaking Friday morning in London, 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 warned Britain that its deficit-reduction approach was 'appropriate' but risky because it was premised on increased demand that is jeopardized by the subdued economic outlook.

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

US Treasury Secretary Tim Geithner called on the wealthy members of the eurozone to give 'unequivocal' financial support to the 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,' he told Bloomberg Television, in remarks that appeared aimed at Germany.

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

French Finance Minister Francois Baroin said he 'tended to look for what most adapted to each situation.'