Finance officials meeting in Arctic consider whether the G-7 is out in the cold

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Arctic meeting a turning point for G-7

IQALUIT, Nunavut — A meeting of finance officials from the Group of Seven leading industrialized countries in this tiny Arctic outpost certainly lived up to host Canada’s billing as a gathering with a difference.

Ditching suits and ties, finance ministers and banking officials grinned in delight as they went dogsledding on frozen Frobisher Bay, crawled into igloos, had cozy chats by a roaring fire and caught glimpses of the Northern Lights.

Host Canadian Finance Minister Jim Flaherty sold the unusual location — the town of Iqaluit, population 7,000 — as a chance to take the G-7 back to its roots of informal straight talk among countries with similar economies and problems, rather than carefully crafted communiques and discussions with outsiders Russia or China.

The hoopla provided by the unique location may have been something of a smokescreen for the group’s waning power as officials acknowledged privately that it is accepting its diminished role in a world where developing countries have grown in influence.

Yet they also indicated they found its less formal tone — more frank discussion, less time haggling over the communique — useful in its own way.

Dropping the usual formal statment that traditionally took time out of talks to draft, finance ministers opted instead for a quick joint press conference on Saturday as they sought to calm jittery global markets with renewed pledges to keep providing large amounts of government support to sustain the economic rebound.

They also played down differences on banking reform following U.S. President Barack Obama’s unilateral proposal to rein in risky bank practices, saying that while approaches would differ to reflect domestic situations they agreed to work toward new global standards.

The G-7 acknowledged its fall in the pecking order last year when it ceded responsibility as the preeminent forum for dealing with the world’s economic and financial problems to the G-20. The recent economic crisis has underscored a belief for many that the exclusive G-7, comprising the United States, Canada, Britain, France, Germany, Italy and Japan, is an outdated grouping.

While those countries used to run the world, they’re now the ones facing soaring government debt, high unemployment and — for Britain and the U.S. — the fallout from multibillion dollar banking system bailouts.

Even as they met in Canada’s remote Nunavut territory, other developed western European countries sparked renewed turmoil in financial markets via fears about rising debt levels in Greece and Portugal.

In contrast, emerging nations like China, India and Russia, have survived the global recession in far better shape — China recorded growth of 10.7 percent last quarter thanks to a stimulus package that spurred car sales and a property boom.

Iqaluit was the first meeting since the G-7 agreed to meet less and issue fewer statements.

Flaherty seized the opportunity of Canada inheriting the rotating presidency of the G-7 this year from Italy to focus discussions among nations with common issues, declining to invite Russia, which rounds out the G-8, or China and India, as Britain did when it held the chair.

He stressed the G-7’s role as a “first responder” in a crisis, pointing to the fact that the grouping remains the world’s largest donors of development aid.

At fireside talks about the G-7’s future on Friday, Flaherty’s office distributed a document that stressed the G-7’s relevance despite the rise of the G-20, pointing out that it serves as a catalyst for ideas to be debated by the larger grouping.

“I think the G-7 has a significant future. We’re a small group. We know each other quite well,” Flaherty told reporters after the meeting. “Most of the large financial institutions are residents some where in the G-7 and I think there’s a sense of shared responsibility, they are to make sure financial sector reform is done effectively efficiently and in a way that will stand the test of time.”

British Treasury chief Alistair Darling said he believed the meeting was “extremely worthwhile and I hope we look back on it as another significant milestone on building a recovery that the world needs.”

But highlighting the shift in power to the G-20, Japan’s new Finance Minister Naoto Kan told reporters that the larger forum was more appropriate for discussing the weakness of China’s yuan — despite the issue’s presence on the agenda here.

And a senior U.S. Treasury official said that the G-7 remained completely committed to making the G-20 the primary forum for international economic disussions, while a British official said that the meetings were likely to become even more informal and may ditch the closing press conference altogether.

The next gathering of the G-7 will be a far lower key affair, taking place on the sidelines of the annual spring meetings of the International Monetary Fund and the World Bank in Washington D.C. in April — and there were suggestions that would become the norm, rather than standalone meetings.

Kan said that “there were opinions that it is not desirable to hold G-7 meetings just before G-8 or G-20 gatherings” to avoid diminishing the importance of those talks.

Still, there was praise for Flaherty’s decision to avoid the bright lights of Ottawa or Toronto in favor of Iqaluit.

Japan’s Kan was so eager to go dogsledding after hearing about the experiences of other officials that he delayed speaking to reporters after the close of the meeting to take a spin on the ice before dusk.

And French Finance Minister Christine Lagarde saw the choice of location as something of a masterstroke: “Coming to the cold and to this beautiful city made the whole thing a lot warmer.”

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Associated Press Writer Martin Crutsinger contributed to this story from Iqaluit, Canada.