(Reuters) - The Group of Seven finance ministers and central bank governors were ready to discuss ways to strengthen the financial system and prevent the credit crunch from undermining the world economy at meetings on Saturday.
Following are highlights of their comments heading into the G7 meeting of finance ministers and central bankers:
US TREASURY SECRETARY HENRY PAULSON on financial issues:
U.S. financial institutions must take losses and strengthen their capital base quickly to stave off the credit crunch, he said an interview with the Nikkei newspaper. “The worst thing is if they don’t raise capital, if they shrink their balance sheet, and then restrain their lending.”
CHANCELLOR ALISTAIR DARLING on financial regulation:
“I am confident that we will take a substantial step forward in strengthening the surveillance systems,” he told the Financial Times newspaper in an interview.
“Where coordinated action is found to be necessary, we will do all that is needed. We are all after the same thing and this is to restore stability.” He also told the London Times that the meeting would focus on giving the financial markets a better early warning system of crisis. “It is quite clear that some of the problems that have arisen could have been prevented.”
FRENCH FINANCE MINISTER CHRISTINE LAGARDE after meeting U.S> Treasury Secretary Henry Paulson:
“I note with satisfaction the evolution in the doctrine of the ECB,” she said, referring to the European Central Bank softening its tone on inflation and uncertainty on the economy.
“It clearly had an effect on the euro’s level. Now, if you ask me if the euro is a handicap or not, I would reply that it continues to pose difficulties for European exporters, and French exporters in particular since they are the ones which concern me primarily.”
Asked whether the ECB should follow up its change of tone with an interest rate cut, Lagarde said: “it’s like the overture of a symphony; you ware always waiting for what comes next”
Regarding her meeting with Paulson: “He’s concerned and we are concerned. He did not use the word recession,” Lagarde said, when asked if he did use the word recession.
“Regarding the housing market, it’s not at the back of his mind but at the front of his mind — right, front and centre.”
Asked if Paulson was pressing other countries to follow the U.S. lead and produce a stimulus plan: “The inventiveness of the media is always extremely surprising.
“He confirms to us very precisely that it was not for him to urge other economies to apply fiscal stimulus.”
Lagarde was also interviewed by Japan’s Nikkei daily.