G-7 says 'severe' downturn to persist, vows to reverse slump

Group of Seven finance chiefs vowed to tackle a “severe” economic downturn that will persist for most of 2009 without spelling out new steps to do so.

The G-7’s finance ministers and central bankers said in a statement released after talks in Rome yesterday that they were working to restore confidence in markets and revive the world economy. They predicted the full effect of individual rescue packages will “build over time.”

“We reaffirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector,” the statement said. “The stabilisation of the global economy and financial markets remains our highest priority.”

The policy makers met after reports this week showed Germany’s economy contracted the most in 22 years in the fourth quarter and US consumer confidence neared its lowest since 1981. With the worst global slump since World War II battering state finances, International Monetary Fund Managing Director Dominique Strauss-Kahn said he expects more countries to need emergency aid.

That’s putting governments and central banks under greater pressure to end the malaise. US Treasury Secretary Timothy Geithner urged initiatives that are “forceful and sustained for a period that matches the likely duration of the crisis” and noted a “a much greater scale of urgency and commitment” within the G-7.