G7 pledges to keep stimulus going, despite debt woes

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

Ministers debated the dangerous fiscal conditions of the euro zone - notably Greece, Spain and Portugal - which have been pushing down global stock markets over the past week. European officials expressed confidence that Greece would be able to deal with its debt troubles when it presents a budget solution next week.

The Group of 7 (G7) also discussed means of recouping billions of dollars in taxpayer funds from banks that were bailed out over the last two years to keep the financial sector afloat, though ministers have been unable to agree on the method.

The G7 took an indirect shot at China for its disputed currency policy, calling on major economies to aid “balanced” growth and ensure their currencies were properly valued to help avoid another global economic crisis.

“Countries with inflexible nominal exchange rates must permit greater flexibility in real exchange rates either through higher inflation or a nominal appreciation of their currency,” according to a G7 document by Canada’s finance ministry that was obtained by

Bloomberg News.

While the global economy has begun 2010 with a tentative recovery from the worst recession in decades, stubbornly high unemployment levels have given the world’s wealthiest nations little to celebrate. The G7 message was that high levels of public spending are still needed.

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

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.

The G7 meeting near the Arctic Circle in the tiny Canadian town of Iqaluit came as the bloc has 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 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.