G7 Vows to Fight Downturn, Praises Yuan Moves

The G7 industrial powers, worried that protectionism is on the rise as recession bites, will promise to do all they can to combat the downturn and limit unwanted spillover effects from their actions, according to a statement being prepared for publication on Saturday.

The text, a draft of which was obtained by Reuters while G7 finance ministers were meeting in Rome, said stabilizing the economy and financial markets was their "highest priority."

• Full Draft Text of Rome G7 Communique

"We reaffirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector," it said.

"We will continue to work together to avoid undesirable spillovers and distortions," said the text.

"The G7 remains committed to avoiding protectionist measures, which would only exacerbate the downturn, to refraining from raising new barriers and to working towards a quick and ambitious conclusion of the Doha Round," of global free trade negotiations, it said.

Welcome Signs on Yuan

According to the draft, the G7 also welcomes China's commitment to a more flexible exchange rate, which should lead to a stronger yuan currency.

The draft communique made no reference to specific currencies other than China's yuan.

"We welcome China's fiscal measures and continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi (yuan) in effective terms,'' the statement said.

"Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange rate markets closely, and cooperate as appropriate.''

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