Global recovery still fragile, warns G7
Nations commit to stimuli
October 5, 2009
By Pan Pylas Istanbul
The world economy was growing faster than expected, but the recovery remained "fragile" and threatened by unemployment, finance ministers from the Group of Seven (G7) rich countries said after their meeting at the weekend.
They said decisive actions had improved conditions for the economy and financial markets. But they warned: "There is no room for complacency since the prospects for growth remain fragile and labour market conditions are not yet improving".
Stimulus measures such as government deficit spending and rock-bottom interest rates have helped the world economy bounce back from the recession, and the International Monetary Fund (IMF) last week urged governments to keep these in place until the recovery was established.
The ministers agreed to keep support measures "until recovery is assured".
In a statement following the meeting, US Treasury Secretary Timothy Geithner said the world's largest economy would unwind the extraordinary policy measures it had taken only when conditions stabilised and growth strengthened.
In the US, the Federal Reserve slashed its key interest rate to near zero and pumped over a trillion dollars into the markets to sustain liquidity and free up lending, while the White House enacted a near $800 billion package (R6.1 trillion) of spending increases and tax cuts to boost the economy.
The other G7 countries have done likewise, as has much of the developing world, and the result has been the faster-than-expected rebound in global economic growth.
Earlier last week, the IMF said the recession was going to be less severe than it had believed just three months ago and raised its forecast for next year's global growth to 3.1 percent from 2.5 percent. The IMF warned that rising unemployment remained one of the key threats to global economic growth. The G7 countries are the US, Japan, Germany, France, the UK, Canada and Italy.
Its role was recently overshadowed by the Group of 20 (G20), which includes developing powerhouses such as China, India and Brazil.
Last week the leaders of the G20 agreed that the bigger body would become the world's "premier" economic forum for decision-making, raising some questions on the G7's future.
There was no reference to the future of the G7 in the communique at the weekend, but French Finance Minister Christine Lagarde dismissed talk of its premature death.
"The G7's existence is fully justified," she said, although she said future meetings might not yield a communique at their conclusion. - Sapa-AP
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