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UPDATE 2-G7 leaders agree to keep money taps open source

* G7 agrees to maintain fiscal stimulus at this stage

* Johnson pushed the need to learn from the 2008 crisis

* “Long-term fiscal anchoring” is needed – said Draghi

* G7 sentiment was inflation was temporary (add details)

By Guy Faulconbridge

CARBIS BAY, England, June 11 (Reuters) – Leaders of the Group of Seven rich countries broadly agreed on the need to continue supporting their economies with fiscal stimulus after the ravages of the COVID-19 pandemic, a source close to the discussions said Friday.

Support for more stimulus was shared by all leaders, including Angela Merkel of Germany, who has traditionally opposed heavy borrowing to boost growth, a position she has relaxed in the face of the crisis. of COVID-19.

US President Joe Biden’s administration urged allies to keep spending, while Treasury Secretary Janet Yellen urged her G7 colleagues in February to “go big.”

“There was a broad consensus around the table on maintaining support for fiscal expansion at this stage,” the source said, adding that Biden, British Prime Minister Boris Johnson and Italy’s Mario Draghi expressed a special support.

The International Monetary Fund has repeatedly urged the Group of Seven countries and others to continue fiscal support measures.

The source said G7 leaders believe there should be long-term policies to ensure the health of public finances in the future, echoing the position of their finance ministers who met earlier this this month in London.

Draghi, president of the European Central Bank from 2011 to 2019, said the large, wealthy Western economies needed some sort of “long-term fiscal anchor” to reassure investors and avoid a hike in government interest rates. market that could hurt the recovery, the source said. .

Leaders believed that an increase in inflation after the lockdown in many countries would be temporary, the source said.

“There was a bit of talk about inflation but the feeling was that it was temporary,” the source said.

G7 leaders have stressed the importance of taking measures to reduce unemployment, such as retraining and supporting young workers, a proposal backed by Canadian Justin Trudeau, the source said.

At the opening of the meeting, Johnson said leaders should be careful not to “repeat the mistakes of the last great crisis, the last great economic recession of 2008, when the recovery was not uniform across sectors. of the society”. (Reporting by Guy Faulconbridge; Writing by William Schomberg; Editing by Daniel Wallis)

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