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G8 stresses need for stimulus as economy is still too shaky

WORLD leaders agreed that the global economy is too unstable to begin rolling back massive fiscal stimulus plans in the near future, according to a draft of the Group of Eight statement on the world economy obtained by The Associated Press.

The leaders, however, are committing to prepare exit strategies from the "unprecedented and concerted action" that has been taken. Germany, worried about running up crippling debt, has pressed for spending restraint, while other major economies such as Britain, Japan and the United States can't rule out the need to pump in more money.

"We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path," the draft communique said.

The measures include continuing their stimulus packages while keeping inflation under control, a particular German concern, while also ensuring that banks have enough cash to keep lending.

The leaders gathered yesterday in the quake-devastated central Italian city of L'Aquila, where they also wrestled over a potential landmark agreement on limiting the global rise in temperature. Over dinner later, they planned to turn their attention to world security issues from Iran to North Korea.

The leaders may fall short of reaching a commitment to keep the globe's average temperature rise under 2 degrees Celsius in a bid to contain global warming. The US, Japan, Canada and Russia - half of the G8 - have previously refused to back it, and the White House declined yesterday to comment if it had signed off on a statement citing the temperature threshold.

US backing for the deal would mark an abrupt turnaround from the Bush administration's stand and be a strong gesture to developing nations.

European Commission President Jose Manuel Barroso said he hoped that the leaders could agree to the specific limit on the rise in temperature.

"We are not yet there where we would like to be but I think things are shaping in the right direction for Copenhagen," Barroso said, referring to the next meeting of a key international summit to replace the Kyoto protocol in December.

Chinese President Hu Jintao cut short his stay in Italy yesterday because of a riot in China's western Xingjiang Autonomous Region. Chinese State Councilor Dai Bingguo attended the G5 leaders' meeting yesterday afternoon on behalf of Hu.

China is among five developing market economies - along with Brazil, India, Mexico and South Africa - who are participating in the summit for the fifth straight year, joining discussions on climate change, aid and development.

The G8 summit will also discuss ways to widen the G8 further amid growing sentiment that the world's most industrialized nations can no longer claim leadership on the global political and economic agenda.

US President Barack Obama signed a US$787 billion economic stimulus bill in February, but experts say only about 15 percent of that has made its way into the economy so far - creating a debate between the wait-and-see camp and economists who urge another stimulus.

In the draft, the leaders also called on experts at the International Energy Forum to look at how they can dampen volatility in oil prices. France and Britain had sought the intervention of regulators to reduce what they called "damaging speculation" in oil futures markets. Oil prices have plunged from about US$147 a barrel last July to US$32 late last year, then to US$73 last week.


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