Stabilisation Beginning?

G8 finance ministers warn that though the world’s largest economies are beginning to stabilise, they still face some major risks as the global recession continues.

At the G8 nations meeting in Italy, the ministers say that stock markets were rising, interest rates are gaining stability and consumer confidence was returning. But the US Treasury chief, Tim Geithner warned that it’s too early to wind down economic stimulus packages, which should remain in place until global recovery is underway.

The meeting in Lecce aimed to lay down the beginnings of a full G8 conference next month in the town of L’Aquila, which was recently hit by an earthquake. But the finance ministers have also recognised that the global situation remains ‘uncertain’.

In a statement released at the end of their meeting, the ministers said that “significant risks remain to economic and financial stability.” This includes the possibility of further rises in unemployment even after output growth resumes.

The statement says: “We have taken forceful and co-ordinated action to stabilise the financial sector and provide stimulus to restore economic growth and there are signs of stabilisation in our economies.”

Encouraging Early Signs

Mr Geithner notes that the early signs are encouraging but warned that: “The global economy is still operating well below potential and we still face acute challenges.

“I don’t think we’re at the point yet where we can say we have a recovery in place.” He added that it was too early to move away from interventionist economic policies that have been in place since September 2008.

Alistair Darling, Chancellor of the UK said that Britain’s economic prospects are still linked to the other G8 nations.

He commented that: “A lot will depend on other countries making progress: on cleaning up their bank balance sheets; volatility in commodity prices, oil for example. So I think there are reasons to be cautious.”

This meeting occurred just two months after the last G8 meeting in London where it was decided that the heads of government should inject billions into the global economy.

Finance ministers agreed to begin considering exit strategies from such extraordinary measures, but Mr Darling said they were not likely to come into play for a while yet: “One thing we are absolutely clear about is we are not there yet. No-one’s talking about existing now, this is some way down the track. We’ve still got to work through this.”

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