World financial leaders focus on budget crises

A crisis in Europe over budget belt-tightening has upended global markets and seized the attention of financial leaders meeting in the Canadian Arctic.

Finance ministers and central bankers from the Group of Seven major industrial countries also planned to try to settle differences yesterday on banking industry changes. There are fears that go-it-alone action such as President Barack Obama's plan to break up big banks will further hamper the world's fledging economic recovery.

Canadian Finance Minister Jim Flaherty hoped his choice of the remote town of Iqaluit, population 7,000, where temperatures can dip to 40 degrees below zero in February, would make officials focus on the task ahead.

The US was represented by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke. The G7 consists of the US, Japan, Germany, Britain, France, Italy and Canada.

The agenda yesterday included developments in the global economy, banking reform and proposals for more debt relief for Haiti as it recovers from a devastating earthquake.

The situation in Europe provided a sobering reminder that G7 policymakers still face major hurdles in repairing a broken global economy.

The Portuguese parliament's defeat of a government austerity plan last Friday triggered renewed concerns that it and other eurozone countries such as Greece and Spain were having trouble tightening controls to manage their budget deficits. That could threaten the economic recovery in Europe.