G7 Finance Ministers Reject Protectionist Measures
ROME - Rejecting protectionism, the Group of Seven finance ministers pledged Saturday to work together to support growth and employment and to strengthen the banking system so the world can overcome its worst financial crisis in 50 years.
But the bad news continues. The final statement on their two-day meeting in Rome also predicts a gloomy forecast, with the severe economic downturn continuing through most of 2009.
The G-7 ministers warned that any protectionist measures to boost national economies would only undermine global prosperity. They also stressed the need to support developing countries to prevent the world's poorest from being the biggest losers in the downturn.
"The stabilization of the global economy and financial markets remains our highest priority," the statement said, noting that the world's seven most industrialized countries have "collectively taken exceptional measures" to address the challenges.
The statement endorses the U.S. and British approach to fixing the banking system by recapitalizing banks. The ministers also said a way must be found to deal with the banks' toxic assets, however no prescription was laid out.
The meeting marked the international debut of new U.S Treasury Secretary Timothy Geithner, who conferred with Federal Reserve Chairman Ben Bernanke as the session began Saturday at the Italian Finance Ministry.
Geithner smiled at cameras, but declined to respond, when asked if any progress was being made.
The G-7 countries urged China to continue allowing its currency to rise in value to even out the world's massive trade imbalances. But there was no reference to comments Geithner made in Washington that were seen as a strong rebuke of China's currency policy, which many believe keeps the yuan artificially low to boost exports.
Geithner, who arrived after a week of widespread criticism over the rollout of the administration's new bank bailout plan, got a boost with Friday's passage of President Barack Obama's $787 billion plan to resuscitate the economy.
But new economic data out Friday in Europe showed the continent's recession deepening, lending urgency to the ministers' task.
The ministers from Britain, Canada, France, Germany, Italy, Japan and the United States, along with their central bankers, are looking for agreement on common approaches to the crisis, with the United States pushing for a bold approach to match its stimulus package.
World Bank President Robert Zoellick, who is also attending the meeting, told Italian bankers on Friday that any effort to keep bailout money at home would only worsen the global crisis, not resolve it.
"In this moment, economic nationalism is neither economic nor nationalistic ... what might be politically correct might be economically incorrect," Zoellick said. "The pull of national politics is very sharp but it's clear that the issues we are dealing with don't stop at national borders."
Among the grim new economic data, the German economy, Europe's engine, plunged by 2.1 percent in the fourth quarter compared to the previous quarter - the sharpest downturn since the country reunified in 1990. Italy and France also reported sharp downturns of 1.8 percent and 1.2 percent.
Looking ahead, the ministers hoped to have written, common principals of transparency within four months, in time for the Group of Eight summit in Sardinia in July.
The recommendations from Saturday's G-7 meeting are also expected to influence a gathering in April of the G-20 leaders - the G-7 nations plus the world's most important developing economies like China and India.
AP Economics Writer Marty Crutsinger contributed to this report.