MercoPress. South Atlantic News Agency

World economy must remain in Intensive Care, says G8

“Early signs” are positive but “global situation remains uncertain”.

The world's largest economies are beginning to stabilise but still face major risks amid an ongoing global recession, according to G8 finance ministers. At a meeting in Italy of G8 nations, the ministers said stock markets were rising, interest rates more stable, and consumer confidence was returning.

However, US Treasury chief Tim Geithner led warnings that it was too early to wind down economic stimulus packages. He said they should remain in place until a global recovery was under way.

At the meeting in Lecce, which aimed to lay the groundwork for a full G8 heads of government conference next month in the earthquake-hit town of L'Aquila, the finance ministers conceded that the global situation “remains uncertain”.

“Significant risks remain to economic and financial stability,” the ministers said in a statement released at the end of their meeting.

It highlighted the possibility that unemployment could continue to rise even after output growth resumes. But they agreed a joint statement which offered signs of hope after nine months of gloomy economic news.

“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,” the statement said.

Mr Geithner said the “early signs” were encouraging, but injected a note of caution.

“The global economy is still operating well below potential and we still face acute challenges,” he said.

“I don't think we're at the point yet where we can say we have a recovery in place,” Mr Geithner warned, saying it was “too early” to move away from the interventionist economic policies put in place around the world since the banking crisis of September 2008.

UK Chancellor Alastair Darling said Britain's economic prospects remained linked to those of other G8 nations.

“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” he said.

The meeting comes two months after a full G8 heads of government meeting in London agreed to inject billions of dollars into the global economy.

While the finance ministers agreed to begin considering exit strategies from those extraordinary measures, Mr Darling said they were unlikely to come into play any time soon.

“One thing we are absolutely clear about is we are not there yet. No-one's talking about exiting now; this is some way down the track. We've still got to work this through,” he said.

G8 is made up of US; UK; Japan; France; Germany; Italy, Canada and Russia.