Iqaluit, Canada : Group of Seven (G7) finance ministers pledged to maintain the flow of stimulus into their economies even as investors focus on mounting budget deficits.
"The position for most countries is to support the economies now and get the budget deficit down as the economy recovers," UK Chancellor of the Exchequer Alistair Darling said in an interview here on Friday night as finance ministers and central bankers began meeting.
"You will see a determination from the G7 countries to do just that."
Governments are trying to spur expansion by spending at a time when investors are increasingly shunning countries with rising debt burdens.
The MSCI World Index of stocks fell to its lowest since October last week amid worries that Greece and some other European nations may default.
"Interest in Spain, Portugal, especially Greece was stronger than I expected," Japanese Finance Minister Naoto Kan told reporters on Friday after the G7 met for dinner and a fireside chat.
US stocks rebounded on Friday as investors speculated the European Union may craft a solution for its indebted members.
Greece is struggling to persuade investors it can restrain the EU's largest budget shortfall without outside assistance, while borrowing costs are also rising for Portugal and Spain.
‘Dress rehearsal'
Deutsche Bank has warned that the increase in the cost of insuring against default the debt of the peripheral European nations may be a "dress rehearsal" for the US and UK, whose own budgets deteriorated during the financial crisis and recession.
"There is always a danger that they wait until too late to shift their attention to the mounting red ink on their fiscal ledgers and risk losing all they tried to achieve in terms of restarting their economies," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
G7 finance ministers are signalling a preference for keeping support for their economic recoveries while pledging to tackle their debt levels once growth is cemented.
In a sign the US rebound may be strengthening, a Labour Department report on Friday showed the unemployment rate unexpectedly dropped to 9.7 per cent in January, the lowest since August.
"We are all agreed that continued stimulus is necessary," Canadian Finance Minister Jim Flaherty said. "There is a concern about deficit levels and, when stimulus ends, how we exit."
"The crisis hasn't yet been overcome," German Finance Minister Wolfgang Schaeuble said. "It's about the right exit strategy. Europe isn't the only one with budget problems."
US Treasury Secretary Timothy F. Geithner said on February 2 that while deficits are a "corrosive threat to our economic future", boosting growth remains the "priority".
