The United States pressed Europe's strongest economies on Friday to give unequivocal financial support to weaker euro zone states to overcome a debt crisis that threatens the world economy.

It is completely within the capacity of the stronger members of the euro area to absorb these costs, U.S. Treasury Secretary Timothy Geithner said as G7 finance chiefs gathered in Marseille to discuss how to revive a stalling recovery.

Those costs would be much, much greater for them and their economies if they sit here and do nothing, and they recognize that, Geithner told Bloomberg Television in comments that appeared aimed primarily at EU economic powerhouse Germany.

With markets looking to the Group of Seven major industrial economies for signs of a policy shift to help faltering growth, G7 sources said the meeting was likely to issue a communique, which G7 chair France had previously said was not planned.

The statement will voice support for U.S. President Barack Obama's $447 billion jobs plan and for Europe's July 21 decision to beef up the powers of the euro zone's EFSF bailout facility, one source said. Another said it would talk about the policy tools different countries could use, but would make no reference to concerted interventions.

Ministers and central bankers were under pressure to calm the biggest confidence crisis in financial markets since the 2007-8 global credit crunch.

But a shock announcement that the top German official at the European Central Bank is leaving early in disagreement with the bank's policy of buying euro zone government bonds to support the likes of Italy and Spain laid bare deep rifts over how to manage the debt crisis.

The ECB confirmed chief economist Juergen Stark would retire nearly three years before his term is due to expire. His decision means Bank of Italy governor Mario Draghi will start his term at the ECB helm in November with a mountain to climb to restore its credibility in Germany, Europe's biggest economy.

France has called for a coordinated response from the Group of Seven industrialized nations after mounting anxiety over Europe's debt crisis and the fragility of its banks caused a big fall in world stock markets in recent weeks.

Differences between the economic problems facing the euro zone, Britain and the United States are complicating the task though, meaning one-size-fits-all solutions will not work.

IMF chief Christine Lagarde said in London before boarding a flight for Marseille that policymakers in advanced economies should use all available tools to boost growth and called for bold action to weather a dangerous new phase of recovery.

She also cautioned against too much fiscal consolidation in a climate of sputtering growth.

But a G7 source told Reuters a unanimous agreement at the Marseille talks on coordinated monetary easing was unlikely.

Fears the global economy may be in its most difficult period since the collapse of investment bank Lehman Brothers have added significance to Friday's talks but there has been little evidence of the unity of purpose shown in 2008 and 2009.

U.S. President Barack Obama's new package of tax cuts and spending could lift U.S. growth by one to three percentage points in 2012 and add more than a million jobs.

But in debt-ridden Europe, there is little scope for fiscal stimulus, and where there is some wiggle-room -- in Germany and Britain -- there is no political appetite for it.

In an indication of the conflicting positions on policy, Canadian Finance Minister Jim Flaherty told Reuters TV decisive moves were needed to restore market confidence and said slowing fiscal consolidation too much would be foolish.

I hope we would all agree we have to stay the course, that we have to go through the pain of fiscal consolidation. It's not easy, it creates stresses in some countries, but it's necessary, we have to get through this rough patch, Flaherty said.

G7 finance ministers and central bankers are holding a working dinner which will be followed by briefings from around 9:15 p.m. local time (1915 GMT) by the U.S., French, German, Canadian and Japanese delegations and ECB President Jean-Claude Trichet.


With Asian economies deeply worried about the West's debt crisis and slow growth, Japan said it will voice its concern on the euro zone debt crisis and seek support for its right to unilateral action over safe-haven buying pushing up the yen.

Bank of Japan Governor Masaaki Shirakawa told reporters in Marseille he hoped the talks would share frank views on the crisis and said it was vital that G7 finance chiefs came up with a firm stance to stabilize the world economy.

There are various factors behind the world economy's uncertainty but Europe's debt problem is one major factor. It is important for Europe to tackle its debt problems for its own sake but it would also indirectly bring positive effects on Japan's economy, he said.

Finance Minister Jun Azumi said Japan would ask the G7 for its understanding on its intentions to counter yen rises.

Lagarde said policymakers must act now, and boldly, giving her blessing to more quantitative easing by central banks and saying the challenge was to find a pace of adjustment that was neither too fast nor too slow.

She said countries facing market pressures must push ahead with urgent fiscal consolidation, while there was scope for slower action in countries not at the mercy of market forces.

If growth continues to lose momentum, balance sheet problems will worsen, fiscal sustainability will be threatened, and the scope for policies to salvage the recovery will disappear, she said.

Decisions by the European and British central banks this week to keep interest rates unchanged accentuated the gloom in Europe but neither indicated that a cut was imminent, while Federal Reserve Chairman Ben Bernanke gave no hint of new stimulus to boost the economy in a keenly awaited speech.

The Organization for Economic Co-operation and Development says growth across the G7 could slow to an anemic 0.2 percent in the last quarter of 2011. Its chief economist Pier Carlo Padoan urged the G7 to send a clear signal it is ready to take action if growth slows further.

(Additional reporting by Daniel Flynn and Claire Watson in Marseille, John Irish in Paris, Keith Weir in London, David Lawder in Washington and Leika Kihara in Tokyo; Writing by Mike Peacock)