MARSEILLE, France ? The financial leaders of the world's most developed economies wrangled Friday over how to revive a faltering recovery at a time when interest rates are already low and government debt is high.
The so-called Group of Seven economies ? the U.S., Canada, Japan, the U.K., France, Italy and Germany ? are all facing a similar challenge. The recovery that began a little over a year ago is already running out of steam, but governments' ability to boost growth is hampered after the financial crisis pushed up their deficits.
Christine Lagarde, the head of the International Monetary Fund, urged policymakers to take concerted action quickly. "The key ... is for policymakers to act with conviction and urgency in tackling today's challenges, while at the same time being nimble, should circumstances change," Lagarde said in London before traveling to the G-7 meeting in Marseille, France.
But big new measures and strong unity in the face of a threatening economic slowdown were elusive among finance ministers and central bankers gathering here, with different nations touting divergent solutions to the crisis.
"I don't think you should expect from this meeting any dramatic change in signals," U.S. Treasury Secretary Timothy Geithner said in an interview on Bloomberg TV.
As President Barack Obama on Thursday proposed a $447 billion plan to create jobs, Geithner, in an opinion piece in the Financial Times, pushed countries with lower debts to slow down their austerity drive to give the world economy a much-needed boost.
That argument did not gain much traction in Marseille.
Germany, which weathered the financial crisis better than most developed economies, has ruled out scrapping cost cuts in favor of stimulus. Just days before Geithner's piece in the Financial Times, German Finance Minister Wolfgang Schaeuble argued in the same newspaper that austerity was the only way of getting the eurozone's struggling economies growing again.
Most other European countries have less of a choice when it comes to reviving their economies with extra spending.
Of all the G-7 states, Italy has been most embroiled in the debt storm. Its government debt, some 120 percent of economic output, is among the highest in Europe and its borrowing rates have jumped in recent weeks as investors fear it may eventually have to be bailed out like Greece, Ireland and Portugal.
But rescuing Italy would likely overwhelm the currency union and the government in Rome is currently pushing massive new spending cuts through parliament.
The U.K., which is outside the eurozone, has also embraced austerity, although its central bank has taken a more aggressive route than its eurozone counterpart, pumping billions of pounds into the British economy.
"We will stick to the deficit reduction plan we have set out," Chancellor of the Exchequer George Osborne said Friday in London, before heading off to Marseille. "It is the rock of stability on which our economy is built," Osborne added.
With little prospect for united action on economic stimulus, the three eurozone countries in the G-7 ? Germany, France and Italy ? were facing pressure from the other members to find a lasting solution to the debt crisis that has dragged on for nearly two years.
Concerns over Europe's ability to provide a united front in its debt crisis efforts was exacerbated Friday, when Juergen Stark, a top ECB decision-maker, resigned unexpectedly. The surprise departure ? coupled with uncertainty over a second bailout for Greece ? caused stocks and the euro to slump.
Canadian Finance Minister Jim Flaherty called on the eurozone to increase their bailout fund beyond the current euro440 billion ($618 billion), an unusually concrete demand from a non-European politician.
Geithner, meanwhile, remained more vague in his comments, saying only that the Europeans "have got some more work to do."
However, the treasury chief did not shy away from blaming the eurozone's reluctance to embrace more radical measures for the global economic troubles. "It was the principle cause of the slowdown we had last summer, and it's been a significant cause of the slowdown we've had this summer," Geithner said.
The talks come on the back of a downbeat assessment of the global outlook by the Organization for Economic Co-operation and Development. The watchdog for the world's most developed economies slashed its forecast for growth in the U.S. and the eurozone this year due to government belt-tightening and falling consumer and business confidence.
The G7 countries make up seven of the world's nine largest economies and collectively account for just over half of the world's total economic output.
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Robert Barr in London and Sarah DiLorenzo contributed to this story.
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