FINANCIAL MARKETS face more pressure after this weekend’s Washington meeting of the Group of Seven finance ministers and central bankers failed to agree measures to tackle the global credit crunch.

The G7 gave a downbeat assessment of the world economy, but stopped short of declaring America was in recession.

“We remain positive about the long-term resilience of our economies, but near-term global economic prospects have weakened,” the group said in a communiqué. “The turmoil in global financial markets remains challenging and more protracted than we had anticipated.”

The G7 also warned that further currency instability could be risky, with “possible implications for economic and financial stability”. This will be interpreted as evidence that the authorities are worried about the dollar’s continued slide.

The finance ministers and central bankers endorsed a report by the Financial Stability Forum that set out measures to improve supervision of banks and markets and prevent a recurrence of the present crisis.

It also called for tougher capital requirements for banks to ensure that they can withstand periods of financial-market stress, and urged closer international co-operation between central banks and regulators.

The G7 called on banks and other firms to disclose within the next 100 days “their risk exposures, write-downs, and fair value estimates for complex and illiquid instruments.”

Banks should do this in their mid-year reporting, it said.

Equity markets were already spooked when the G7 gathered in Washington late on Friday, the Dow Jones industrial average dropping by 257 points, or 2%, to 12,325, on disappointing first quarter earnings from GE.

Experts warned that, unless backed up by concrete measures, the G7’s statement was likely to be given the thumbs down by financial markets.

“The markets will interpret this as evidence that no G7 accord has come out of this and that most of it will be left to the United States,” said Gerard Lyons, head of research at Standard Chartered, the bank. “There will be disappointment that they are not responding more to what they acknowledge to be a deteriorating situation.”

While officials played down expectations of a co-ordinated plan to deal with what chancellor Alistair Darling said was the biggest economic shock since the Great Depression, markets had speculated on early action.

“A number of people thought something would emerge in terms of co-ordinating additional liquidity and a relaxation of capitalrequirements,” said former Bank of England monetary policy committee member Sushil Wadhwani of Wadhwani Asset Management. “In that context it was disappointing.”

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