G8 still sees significant risks for world economy

G8 leaders believe the world economy still faces "significant risks" and may need further help, according to the conclusions of a summit which took place yesterday (8 July) in L'Aquila, Italy.

Final documents cautioned that "significant risks remain to economic and financial stability" while "exit strategies" from pro-growth packages should be unwound only "once recovery is assured".

"Before there is talk of additional stimulus, I would urge all leaders to focus first on making sure the stimulus that has been announced actually gets delivered," Canadian Prime Minister Stephen Harper said.

That chimed with comments from the International Monetary Fund, which said it believed the global economy was starting to pull out of recession but recovery would be sluggish and policies needed to remain supportive.

Leaders met in L'Aquila, a mountain town wrecked by April's earthquake and a fitting backdrop to talks on a global economy struggling to overcome the worst recession in living memory.

The Group of Eight - the United States, Germany, Japan, France, Britain, Italy, Canada and Russia - kicked off with debate on the economic crisis, after what one analyst called a "reality check" in recent weeks on the prospects for rapid recovery.

G8 leaders badly underestimated the economic problems facing them when they met in Japan last year, and were expected to focus on what must be done to prevent another meltdown.

"Although there have been signs of stability in the economy and the sentiment has improved, the real economy has not recovered yet with job and wage conditions still stagnant," said Takao Hattori, senior strategist at Mitsubishi UFJ Securities.

But few big initiatives were expected as the G20, a broader forum that also includes the main emerging economies, is tasked with formulating a regulatory response to the crisis and meets in September in Pittsburgh after an April summit in London.