The Group of Eight major industrialized countries has begun preparing for an economic recovery, acknowledging on Saturday "signs of stabilization in our economies" and agreeing to ask the International Monetary Fund to study ways to unwind hefty stimulus packages.

In a communique released at the end of a two-day meeting in Italy, the group's finance ministers said that although the global economy is still weak, so-called exit strategies from monetary and fiscal stimulus measures — like tax cuts and lower interest rates — were "essential to promote a sustainable recovery over the long term."

The ministers, including Canada's Jim Flaherty, said they had asked the IMF to analyze potential strategies to assist with the process.

However, the ministers from Canada, the United States, Japan, Germany, France, Britain, Italy and Russia, as well as the European Union, added that the "situation remains uncertain and significant risks remain to economic and financial stability" and stressed their commitment to provide any more stimulus the economy might need.

"These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges," U.S. Treasury Secretary Timothy Geithner said after the meeting.

The talks in Italy were designed to set an agenda for a meeting of G8 heads of state next month in L'Aquila, central Italy.

Financial markets have rallied over the last three months on better-than-expected economic data, but there are worries in the U.S. and Britain that continental Europe has not done enough to deal with the recession.

And the World Bank forecast Thursday that the global economy will contract three per cent this year, far worse than a previous estimate of minus 1.75 per cent.

Exit strategies needed

Flaherty said the G8 needs to be ready when recovery is assured.

"We began this conversation on exit strategies at these G8 meetings and they will continue at subsequent meetings," said Flaherty, speaking in a conference call from Lecce.

He said the recent rise in stock prices and the decline in some key lending rates also offer "glimmers of hope."

"However, as I've said before, there will be no sustainable economic recovery until we have fixed the banks, provided them with the capital and access to funding required to support lending," he said.

Meanwhile, British Treasury chief Alistair Darling played down the urgency of exit strategies in the current economic climate, noting that some countries are only just beginning the process of sorting out problems in the banking sector.

"One thing we are absolutely clear about is we are not there yet," Darling told reporters. "No one's talking about exiting now, this is some way down the track. We've still got to work this through."

Germany has been a particularly strong critic of the lower interest rates, tax cuts and measures to boost the money supply that have been employed by countries including Britain and the United States, warning they are potentially inflationary and deficit-building.

Geithner said measures to repair the credit markets and the financial system "are designed to be temporary and quickly reversible."

The communique also spelled out the need for a set of common principles and standards for propriety, integrity and transparency in international business and finance.

They agreed on the objectives of a strategy, dubbed the Lecce Framework, to identify and fill regulatory gaps and foster the international consensus needed to rapidly implement new rules.