Finance chiefs warn on recovery as G7 meets

Finance chiefs on Saturday said the global economic crisis was far from over.

Finance chiefs on Saturday said the global economic crisis was far from over as ministers from the Group of Seven (G7) leading rich economies met in Istanbul amid concern about the weak US dollar.

"No way can we say that the crisis is over" because unemployment is rising and the financial sector is weak, International Monetary Fund managing director Dominique Strauss-Kahn said in a BBC World debate ahead of the talks.

No way can we say that the crisis is over.

Dominique Strauss-Kahn

French Finance Minister Christine Lagarde, who will be at the G7 talks along with counterparts from Britain, Canada, Germany, Italy, Japan and the United States, said: "I have my eyes riveted on the unemployment rate."

Russian Finance Minister Alexei Kudrin will also attend the meeting and the talks will be the first for Japan's new finance minister, Hirohisa Fuji, seen as an experienced bureaucrat lacking in international experience.

The meeting in Turkey's biggest city comes after the United States -- the world's biggest economy -- this week reported higher than expected unemployment figures and a setback in the recovery of its battered manufacturing sector.

US President Barack Obama on Friday said the job losses were "a sobering reminder that progress comes in fits and starts."

"We're going to need to grind out this recovery step by step," he added.

The IMF has said that a tentative global economic recovery has begun and the G7 talks will discuss "the next steps and implementation" of a roadmap agreed at the G20 summit last week for recovery, a US Treasury official said earlier.

The IMF has also warned however that many economic risks remain and on Saturday it urged the European Union to ensure bank balance sheets are cleansed of the toxic assets that helped precipitate the crisis.

"It's time to clean the banks," Marek Belka, head of the IMF's European department, told reporters ahead of the G7 meeting after the European Union said stress tests on 22 top banks had shown they were stable.

"We need a more resolute approach to addressing the balance sheet risks faced by banks and to take action for recapitalisation or to restructure viable institutions and dissolve others as necessary," he said.

European finance ministers have meanwhile put pressure on the US to support a weak dollar, with Lagarde saying on Friday: "Everyone needs a strong dollar."

A US Treasury official said the G7 finance chiefs were to discuss implementation of a roadmap for recovery agreed at the G20 summit last week.

The G7 grouping of rich global economies has now been eclipsed by the G20 which includes major emerging markets such as Brazil, China, India and Russia.

Leaders at a G20 summit in the US city of Pittsburgh last week agreed the wider grouping was the main forum for international economic cooperation.

Stressing the decline of the G7, Strauss-Kahn made disparaging comments about the group in an interview on Friday.

"The old G7 -- I was about to say the late G7," the former French Socialist finance minister told news television network France 24.

G7 meetings were "a bit without substance" and "floating in the clouds with communiques which no longer interest anyone," he added.

Signs of recovery have pushed down the value of the dollar, which is traditionally seen on currency markets as a safe haven in tough economic times and whose status as the world's main reserve currency has been questioned.

The dollar was trading at 1.4572 to the euro in New York late on Friday.

The current state of the dollar has led some experts to conclude that Washington is allowing the currency to lose value as a way of boosting US exports by making them cheaper -- a tactic that would weaken European exports.

US Treasury Secretary Timothy Geithner has sought to dampen these fears, saying recently that "a strong dollar is very important" to the US economy.