By Anna Willard and David Lawder
LECCE, Italy, June 13 (Reuters) - The world's rich nations, heartened by signs the credit crisis is easing, have started to consider how to unwind rescue steps for their economies once recovery is certain, their finance ministers said on Saturday.
Meeting in southern Italy, the ministers described their economies in the most positive terms since the collapse of Lehman Brothers nine months ago ushered in the world's worst financial crisis since the Great Depression of the 1930s.
'The force of the economic storm is receding. There are encouraging signs of stabilisation across many economies,' said U.S. Treasury Secretary Timothy Geithner as finance ministers of the Group of Eight nations ended two-day talks.
But ministers clearly differed over how quickly the world should start rolling back huge state spending plans and hiking interest rates. And there was continued disagreement over other aspects of the crisis, especially testing the health of banks.
In the end of meeting communique, ministers said they had begun discussing the need for an eventual end to economic stimulus policies. They asked the International Monetary Fund to analyse possible strategies.
EXIT STRATEGIES
A surge in long-term government bond yields over the past several weeks shows markets fear huge sums of money poured into economies by drastic stimulus programmes will ultimately fuel inflation and cripple state finances.
Pressure has therefore been building in the G8, particularly from fiscally conservative nations such as Germany and Canada, for plans to wind down stimulus as soon as it is no longer needed -- 'exit strategies' that would prevent market interest rates from climbing high enough to threaten economic recovery.
But if some countries roll back stimulus plans earlier than others, they may be accused of not doing their fair share to ensure a global recovery.
Russian finance minister Alexei Kudrin described the meeting as 'stormy', featuring heated debate on what stage of the crisis the world had reached.
The ministers' communique stressed there would be no immediate end to stimulus, noting unemployment might continue rising even if production began picking up. 'While the economic outlook is improving, the situation remains uncertain,' it said.
Geithner indicated the United States was unlikely to tighten policy any time soon: 'It is too early to shift toward policy restraint.'
Underlining the precariousness of any economic recovery, data released as the meeting began on Friday showed euro zone industrial production shrank by more than a fifth in April.
A G8 source, who declined to be named, told Reuters that the IMF report would probably be presented at the fund's October annual meeting in Istanbul.
The study could give governments some political cover when they eventually start making painful cuts in state spending to bring budget deficits under control, and when central banks begin to raise interest rates back up from near-zero levels.
BANK STRESS
The meeting appeared to make little progress on one tool for restoring confidence to the global financial system: 'stress tests' to determine the financial strength of banks.
Canadian Finance Minister Jim Flaherty called on Europe to conduct more stress tests and to reveal the results, at least on a system-wide basis.
But Europe's leading powers are divided on publishing results of their tests, which are run by different regulators using different methods, and there was no mention of stress tests in the G8 communique.
French Economy Minister Christine Lagarde said the Europeans would 'explain nicely to the Americans' that there would be no quick consensus on stress tests.
The G8 ministers released a set of principles and standards for the conduct of business globally, calling for more information and protection for investors, tighter regulation, and a stronger sense of commercial ethics.
'The breadth and intensity of the prolonged downturn have revealed the importance of strengthening our commitment to standards of propriety, integrity and transparency,' said a summary of the principles, to be called the 'Lecce Framework'.
The G8 groups the United States, Germany, Japan, Britain, France, Italy, Canada and Russia.
For stories from the summit, click:
For key summit issues for markets, click:
(With additional reporting by Gernot Heller and Gavin Jones; Editing by Andrew Torchia)
(patrick.graham@thomsonreuters.com; +44 7590 458 997)
Keywords: G8/
COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LECCE, Italy, June 13 (Reuters) - The world's rich nations, heartened by signs the credit crisis is easing, have started to consider how to unwind rescue steps for their economies once recovery is certain, their finance ministers said on Saturday.
Meeting in southern Italy, the ministers described their economies in the most positive terms since the collapse of Lehman Brothers nine months ago ushered in the world's worst financial crisis since the Great Depression of the 1930s.
'The force of the economic storm is receding. There are encouraging signs of stabilisation across many economies,' said U.S. Treasury Secretary Timothy Geithner as finance ministers of the Group of Eight nations ended two-day talks.
But ministers clearly differed over how quickly the world should start rolling back huge state spending plans and hiking interest rates. And there was continued disagreement over other aspects of the crisis, especially testing the health of banks.
In the end of meeting communique, ministers said they had begun discussing the need for an eventual end to economic stimulus policies. They asked the International Monetary Fund to analyse possible strategies.
EXIT STRATEGIES
A surge in long-term government bond yields over the past several weeks shows markets fear huge sums of money poured into economies by drastic stimulus programmes will ultimately fuel inflation and cripple state finances.
Pressure has therefore been building in the G8, particularly from fiscally conservative nations such as Germany and Canada, for plans to wind down stimulus as soon as it is no longer needed -- 'exit strategies' that would prevent market interest rates from climbing high enough to threaten economic recovery.
But if some countries roll back stimulus plans earlier than others, they may be accused of not doing their fair share to ensure a global recovery.
Russian finance minister Alexei Kudrin described the meeting as 'stormy', featuring heated debate on what stage of the crisis the world had reached.
The ministers' communique stressed there would be no immediate end to stimulus, noting unemployment might continue rising even if production began picking up. 'While the economic outlook is improving, the situation remains uncertain,' it said.
Geithner indicated the United States was unlikely to tighten policy any time soon: 'It is too early to shift toward policy restraint.'
Underlining the precariousness of any economic recovery, data released as the meeting began on Friday showed euro zone industrial production shrank by more than a fifth in April.
A G8 source, who declined to be named, told Reuters that the IMF report would probably be presented at the fund's October annual meeting in Istanbul.
The study could give governments some political cover when they eventually start making painful cuts in state spending to bring budget deficits under control, and when central banks begin to raise interest rates back up from near-zero levels.
BANK STRESS
The meeting appeared to make little progress on one tool for restoring confidence to the global financial system: 'stress tests' to determine the financial strength of banks.
Canadian Finance Minister Jim Flaherty called on Europe to conduct more stress tests and to reveal the results, at least on a system-wide basis.
But Europe's leading powers are divided on publishing results of their tests, which are run by different regulators using different methods, and there was no mention of stress tests in the G8 communique.
French Economy Minister Christine Lagarde said the Europeans would 'explain nicely to the Americans' that there would be no quick consensus on stress tests.
The G8 ministers released a set of principles and standards for the conduct of business globally, calling for more information and protection for investors, tighter regulation, and a stronger sense of commercial ethics.
'The breadth and intensity of the prolonged downturn have revealed the importance of strengthening our commitment to standards of propriety, integrity and transparency,' said a summary of the principles, to be called the 'Lecce Framework'.
The G8 groups the United States, Germany, Japan, Britain, France, Italy, Canada and Russia.
For stories from the summit, click:
For key summit issues for markets, click:
(With additional reporting by Gernot Heller and Gavin Jones; Editing by Andrew Torchia)
(patrick.graham@thomsonreuters.com; +44 7590 458 997)
Keywords: G8/
COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.