Finance leaders from the top industrialised nations of the world showed unity in response to an economic slowdown and acknowledged that the situation could worsen due to the deteriorating US housing market. In a statement after meetings in Tokyo, the Group of Seven stated that economic growth prospects had deteriorated since their last meeting in October, although the fundamentals remained strong and the US economy was likely to avoid a recession. Italian Economy Minister Tommaso Padoa-Schioppa noted a greater sense of pessimism and concern compared to October. The finance ministers and central bankers from Japan, the United States, Canada, Britain, Germany, Italy, and France anticipated varying degrees of slowdown in their countries in the near term. They highlighted significant risks from the US housing market decline and the resulting credit tightening, which has hindered the flow of money to consumers and businesses that drive the global economy. Banks with high levels of debt have reduced lending due to increasing losses, mainly from failing U.S. home loans, surpassing $100 billion. This has led to concerns about a harmful cycle as consumer spending decreases, causing businesses to cut back and lay off workers. Glenn Maguire, chief economist for Asia Pacific at Societe Generale in Hong Kong, observed that the G7 did not provide much detail on how they plan to support the economy through coordinated action. He emphasized that the economic challenges stem from internal issues in the U.S. and may not be solved by a globally synchronized plan. U.S. Treasury Secretary Henry Paulson warned that global markets could face a prolonged period of instability. In prepared remarks issued after the meeting, Paulson stated that the current financial crisis is severe and ongoing. He mentioned that as the financial markets recover from this stressful period, we should anticipate continued volatility as risk is reassessed. The G7 leaders recommended that banks fully disclose their losses and strengthen their balance sheets to help restore market operations to normal. German finance minister Peer Steinbrueck warned that writeoffs could amount to $400 billion. The communique emphasized the importance of closely monitoring developments and taking necessary actions, both individually and collectively, to ensure stability and growth in the economies. Promises to collaborate in restoring the financial system's health were overshadowed by disagreements over fiscal and monetary policies leading up to the G7 summit. Concerns arose in Europe regarding the U.S. Federal Reserve's rapid interest rate cuts and fiscal stimulus package, potentially straining relations with allies. However, tensions eased after the European Central Bank indicated it may follow suit in cutting rates, aligning with other central banks. French Economy Minister Christine Lagarde welcomed this move but expressed a desire for further actions. European leaders were particularly worried about the euro's strength against the dollar, which reached a record high following the Fed's rate cuts in September. However, the currency weakened after the ECB changed its position. Foreign exchange issues were not a priority at Saturday's meeting due to more urgent economic concerns. The communique reiterated the importance of China allowing its yuan to appreciate faster, as many G7 leaders believe the undervalued yuan gives China an unfair trade advantage and have urged Beijing to increase domestic investment to rebalance the global economy. The statement recommended that oil exporters increase their production following a brief period where oil prices exceeded $100 per barrel. Although prices have since decreased, they rose by 4 percent to $91.77 on Friday, marking the largest increase in nearly two months, due to supply issues and the approaching U.S. cold weather.