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G8 finance officials seek agreement on exit

TOP financial officials from the Group of Eight industrialized nations faced divisions today over the importance of unwinding hefty stimulus packages now that the first signs of global economic recovery have emerged, as well as whether Europe should run US-style stress tests on its banks.

Finance ministers looked relaxed as they gathered in a medieval castle to set an agenda for a meeting of G8 heads of state next month in quake-stricken L'Aquila in central Italy.

During the gathering, the United States and Britain are expected to urge members of the Group of Eight industrialized countries to stay committed to expansive monetary and fiscal measures. Several European countries and Canada want a discussion of ending those measures to be the main topic.

"I think it's appropriate that we do look a little bit down the road and plan to get the private sector back into the markets and the public sector withdrawing from the markets," Canadian Finance Minister Jim Flaherty told reporters before a working dinner last night.

The US, Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union are trying to set the agenda for a meeting of G8 national leaders in July in earthquake-stricken L'Aquila in central Italy.

"We think it will be completed in a positive way, working together for a common solution," Italian Finance Minister Guilio Tremonti told reporters.

US Treasury Secretary Timothy Geithner said this week that he would explain the rigorous public stress tests conducted on 19 of America's biggest banks to his counterparts.

Britain has conducted the tests, but released less detail on the results than the United States, while Germany has argued they could undermine the fledgling economic confidence.

To pursue his agenda, Geithner had bilateral meetings yesterday with his Russian and Japanese counterparts Alexei Kudrin and Kaoru Yosano as well as Italy's central bank chief Mario Draghi, in his function as chairman of a Group of 20 committee set up to give early warning of risks to the global economy, with whom he discussed the stress tests. Draghi said the meeting went well.

Geithner met earlier today with British Treasury chief Alistair Darling.

There is more optimism than when ministers last met as part of the wider Group of 20 in England in April.

Financial markets have rallied strongly over the last three months largely on better-than-expected economic data, as well as hopes that the financial sector is stabilizing. Ten of the largest US banks were ruled strong enough to repay $68 billion in government bailout money. And other data out on Thursday showed a rise in US retail sales and lower US unemployment claims, as well as rising global demand for energy.

But there are worries in the US and Britain that continental Europe has not done enough to deal with the recession. And the World Bank forecast on Thursday the global economy will contract 3.0 percent this year, far worse than a previous estimate of minus 1.75 percent.

The Group of Eight is comprised of the US, Japan, Germany, France, Britain, Italy, Canada and Russia.


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