G-7 seeks to calm global markets, sustain rebound

IQALUIT, Nunavut — Top finance officials of the world’s seven major industrial countries pledged today to work to calm global markets and maintain government stimulus to sustain an economic rebound.

Speaking for the group, Canadian Finance Minister Jim Flaherty said leaders of the Group of Seven countries also discussed strategies they will use to withdraw stimulus once the recovery strengthens.

But Flaherty and other leaders did not indicate they were planning to propose any further stimulus beyond what they have already unveiled. They said they would push ahead with those efforts this year.

Flaherty spoke as the G-7 officials ended a two-day meeting in the Canadian Arctic. They met as financial markets were roiled this week over fears that a European debt crisis could derail the global recovery.

The Canadian finance minister said the leaders discussed the debt problem 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.

Treasury Secretary Timothy Geithner said European officials “gave us a very comprehensive review” of the crisis in Greece.

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

Flaherty had chosen the remote town of Iqaluit, population 7,000, where temperatures can dip to 40 degrees below zero in February, to try to promote more informal discussions, which he dubbed fireside chats.

The United States was represented by Geithner and Federal Reserve Chairman Ben Bernanke. The G-7 consists of the United States, Japan, Germany, Britain, France, Italy and Canada.

The talks wrapped up on today with discussions on the global economy, banking reform and Haiti, where the G-7 countries endorsed a U.S.-backed effort to get the International Monetary Fund and other lending agencies to grant debt relief to Haiti as it struggles to recover from last month’s devastating earthquake.

Developments in Europe in the past week provided a reminder that G-7 policymakers still face major hurdles in repairing a broken global economy.

The Portuguese parliament’s defeat of a government austerity plan triggered renewed concerns that it and other countries such as Greece and Spain were having trouble tightening budget controls to manage their budget deficits. That could threaten the economic recovery in Europe.

Stocks fell in Asia and Europe, while the Dow Jones industrial average clawed back to a small gain Friday after suffering the largest single-day drop in seven months the previous day on worries about the global economy.

Heading into the meetings, some G-7 nations had expressed unhappiness about President Barack Obama’s surprise announcement last month that the United States would seek tougher rules to prevent risky actions by big banks from toppling the entire financial system.

There was more consensus on the need to keep government spending going this year as a transition until consumers and businesses boost their own purchases.

Obama presented a budget plan this past week that would boost job-creation efforts and raise the U.S. budget deficit to a record $1.56 trillion this year. British Prime Minister Gordon Brown is also stressing government stimulus. Critics point out that the country’s budget deficit as a share of its gross domestic product could reach 12 percent this year.

In Japan, where the economy has struggled for two decades, the government unveiled more stimulus spending last week.