G-7 strives to achieve delicate balancing act to promote fledgling global recovery

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G-7 seeks to calm global markets, sustain rebound

IQALUIT, Nunavut — Top finance officials of the seven major industrial countries sought to calm jittery markets by pledging Saturday to keep providing government aid to sustain a fledgling economic rebound.

But officials of the Group of Seven countries meeting in the Canadian Arctic acknowledged their delicate balancing act. They need to revive growth, which means providing more government stimulus.

But such spending has driven deficits to historic highs. And it’s raised fears among investors about whether all that fresh debt can be repaid.

Those worries were underscored in the past week. Investors sent global financial markets into a tailspin over growing concerns about debt levels in Greece.

Investors fear Greece may default or require a bailout from already strapped European governments. Those concerns are spreading to other financially troubled governments such as Portugal and Spain.

All three nations share the euro currency. Their debt burdens have reminded investors of the fragility of the global rebound from the worst recession since the Great Depression.

“The world economy is coming back,” Canadian Finance Minister Jim Flaherty told reporters as the two-day G-7 meeting ended. “We’ve been through together a very difficult time, a very uncertain time and now we see signs of recovery.”

That view was echoed by Flaherty’s colleagues. The group includes U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke. The G-7 countries are the United States, Japan, Germany, France, Britain, Italy and Canada.

The finance ministers pledged to keep government stimulus programs going this year. But none unveiled any new initiatives.

Geithner came to the meeting days after President Barack Obama sent Congress a spending plan that includes a $100 billion package of jobs initiatives. That spending would drive this year’s U.S. budget deficit to a record $1.56 trillion.

Obama’s program is an effort to attack high U.S. unemployment in an election year. The president declared in his State of the Union address that jobs would be his top priority.

U.S. deficits have raised fears among investors about possible inflation and a devalued dollar. But Geithner reiterated that the administration remains committed to a strong dollar.

Geithner said that once the recovery gains strength, the administration will “turn to starting to unwind and walk back the exceptional measures we took in this crisis.”

British Treasury chief Alistair Darling is also pushing stimulus spending to fight high unemployment even as Britain’s budget deficit surges. Darling’s government is facing a tough election campaign this spring.

Darling said “the key challenge is to ensure that we get our borrowing down, get our deficits down, but at the same time we do that in a way that doesn’t damage the recovery.”

He said there’s widespread agreement among the G-7 countries on that principle.

Geithner said European officials “gave us a very comprehensive review” of the debt crisis in Europe there.

“They made it clear to us that they will manage this with great care,” Geithner told reporters.

Flaherty had chosen the remote town of Iqaluit, population 7,000, to try to promote more informal discussions. He dubbed them fireside chats.

He said the effort had been a resounding success. Several finance officials took the opportunity to go dogsledding on frozen Frobisher Bay — an experience Geithner and Bernanke passed up.

The G-7 officials agreed to support a U.S.-backed proposal to get the International Monetary Fund and the World Bank to forgive loans they have made to Haiti. The goal is to support Haiti as it struggles to recover from last month’s devastating earthquake.

Heading into the meetings, some G-7 nations complained about Obama’s surprise proposal on bank regulations last month. Obama said the United States would seek tougher rules to prevent risky trading by big banks from threatening the financial system.

But in their joint news conference Saturday and in separate discussions with reporters, the G-7 officials played down any differences on the banking issue.

They said they all supported the broad reform goals and were on track to meet deadlines set by the larger Group of 20 nations to develop reform programs by year’s end. The G-20 includes major developing nations such as China and India.

Associated Press writer Rob Gillies contributed to this report.

On the Net:

Meeting site: g8.gc.ca/home/