OTTAWA (Reuters) - The Group of Seven leading industrialized nations will signal at a meeting in Washington this weekend that there are glimmers of economic hope but that the global economy is not out of the woods yet, a senior Canadian finance official said on Wednesday.
The official, briefing reporters on condition of anonymity, said people have been frustrated at how long it has taken to isolate toxic assets held by banks around the world -- seen as a precondition for economic recovery.
However, the United States is making some progress in this area and U.S. Treasury Secretary Timothy Geithner will likely update his G7 colleagues on bank stress-testing, the official said.
Canada also expects to hear more from European countries on their efforts to stabilize banks.
The Bank of Canada sounded frustrated on Tuesday when it said “measures to stabilize the global financial system have taken longer than expected to enact,” prompting it to mark down its forecasts Canadian economic growth.
But Finance Minister Jim Flaherty issued a hopeful message on Wednesday, saying he detected numerous small signs of encouragement in the global economy.
“The Americans are proceeding with their stress testing of their banking system. That’s going to be a major step forward during the month of May. So these are encouraging signs.”
He noted expected economic growth in India of 6 percent and resilience in the Chinese economy as other positive signs.
The G7 and G20 finance ministers and central bank chiefs will gather in Washington this week for the spring meetings of the International Monetary Fund and World Bank.
Finance ministers and central bankers from the G7 rich nations will meet on Friday, followed by a meeting of the Group of 20, which includes major emerging powerhouses such as China and India.
Debate has emerged over the usefulness of having separate meetings for the G7 and G20. Flaherty said policies to fix the cracks in the financial system were better handled by policymakers in the core G7 countries responsible for the crisis - the United States, Canada, Britain, Germany, France, Italy and Japan.
“There are some discussions, particularly about banking systems and the integrity of financial systems, that directly involve G7 countries in particular, so there’s an advantage to a smaller discussion group on those issues,” he said.
“There will certainly be a G7 communique. There may not be a G20 communique, since we just met in London with the leaders.”
The meetings will give countries a chance to follow up on their commitments at the G20 summit in early April to reform financial regulations, inject stimulus into the economy and bolster funding for poor countries through the IMF and other institutions.
Reporting by Louise Egan and Randall Palmer; editing by Peter Galloway