- The Washington Times - Sunday, June 14, 2009

LECCE, Italy | The Group of Eight industrialized nations began looking ahead to economic recovery Saturday as they considered how to unwind their massive stimulus policies while also warning it was too early to celebrate the end of the global crisis.

Acknowledging “signs of stabilization in our economies,” G-8 finance ministers tasked the International Monetary Fund with studying how best to roll back measures introduced to help the global economy once the crisis could be considered over.

But the ministers said it was still too early to shift strategies, as many economies were still stabilizing from the financial and economic turmoil, whose full impact was yet to be felt in some corners of the world.

They backed away from proposals by some countries to give the IMF until the end of the year to complete its investigation, suggesting the group agreed to a compromise. The United States and Britain are worried that continental Europe has not done enough to deal with the recession, while more cautious countries like Germany fret about the potential long-term risks posed by the stimulus measures.

The finance ministers’ meeting - meant to set the agenda for a gathering of G-8 heads of state next month in L’Aquila, in central Italy - was held as several months of improving economic data fueled a rally on world stock markets.

“These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges,” Treasury Secretary Timothy F. Geithner told reporters after the meeting, emphasizing it was too early to shift policy.

“Economic and financial recovery … will be stronger and more sustainable if we make clear today how we get back to fiscal sustainability when the storm has passed,” he said.

The World Bank forecast last week that the global economy will shrink by 3.0 percent this year, far worse than a previous estimate for a 1.75 percent contraction.

In their joint statement after the two-day meeting, ministers from the U.S., Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union said that the “situation remains uncertain and significant risks remain to economic and financial stability” and stressed their commitment to provide any more stimulus the economy might need.

The G-8 ministers also agreed on the objectives of a strategy, dubbed the Lecce Framework, to identify and fill regulatory gaps and to implement new rules to promote transparency in international business and finance.

And they reaffirmed their commitments to tighten international regulation, to refrain from protectionism and to pass the longer-term reform of international financial institutions pledged at the Group of 20 meeting in London in April.

Mr. Geithner said that proposals on regulatory reform due to be outlined in the United States would include several international measures. The U.S. will call on foreign banking regulators to develop proposals by the end of this year to find ways to quickly resolve failures of cross-border financial firms, he said.

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