WASHINGTON -- Finance officials from the world's top economic powers pledged Friday to do all they can to limit damage to the global economy from a jarring credit crisis as Wall Street took another plunge.
"We remained committed to doing our part in sustaining strong global growth," the finance officials said in a joint statement. While saying the functioning of global financial markets was improving somewhat, they warned that "uneven conditions are likely to persist for some time and will require close monitoring."
The turmoil that financial markets have suffered through in recent months dominated the Group of Seven discussions, which were hosted by Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke. Besides the United States, the other members of the G7 are Japan, Germany, France, Britain, Italy and Canada.
The finance officials didn't spell out a specific course of action. Rather, they sought to strike a confident tone that they are on top of the situation. Finance officials also said they will seek to find the causes of the turmoil and learn lessons from it.
"Our response to recent financial turbulence must be based on full analysis of its causes," the officials said in their statement.
Risks to the global economy have intensified since finance officials from the Group of Seven countries last gathered here in April.
The housing slump in the United States has deepened. Problem mortgages have multiplied. Credit has dried up for risky and some not-so-risky borrowers. The spreading troubles unhinged Wall Street in the late summer and sent stocks worldwide into a tailspin.
It appeared things had calmed down since, but Wall Street got unnerved again on Friday. The Dow Jones industrials plunged 366.94 points. Ominously, the tumble came on the 20-year anniversary of the Black Monday stock crash. This time it was lackluster corporate earnings, credit concerns and rising oil prices that rattled investors.
Given the economy's delicate state, there are worries that more bad news on these fronts could easily push edgy investors into another bout of panic and spook both businesses and individuals, whose spending and investment are critical to the world's economic health.
Surging oil prices also are complicating the global outlook. They briefly topped $90 a barrel, a new trading high, then eased a bit and closed at $88.60 a barrel Friday in the United States.
"Recent financial market turbulence, high oil prices and weakness in the U.S. housing sector will likely moderate" world economic growth, the officials said. The International Monetary Fund projects that economic growth this year will slow to 5.2 percent, a still-solid pace.
Growth in the United States, however, is expected to be just 1.9 percent this year, which would be a five-year low. "The housing decline is still unfolding and I view it as the most significant current risk to our economy," said Paulson.
The globalization of the financial markets -- credited with giving investors more choices -- has also spurred an array of complex investment instruments flowing across international borders. The meltdown in the United States with risky subprime mortgages made to borrowers with spotty credit or low incomes also ended up hurting investors in Europe and elsewhere. Banks, hedge funds and others that invested in subprime mortgage-backed securities suffered big losses.
The officials said the Financial Stability Forum -- under the leadership of Bank of Italy Governor Mario Draghi -- will form a group to look at the underlying causes of the recent market turbulence.
The group will be asked to offer proposals in several areas, including risk management, accounting and valuation of sophisticated financial instruments called derivatives and the role of credit rating agencies in the debacle. The panel's final report isn't expected until April 2008.
"We expect market participants to address many of the shortcomings that were exposed by recent events," the G7 officials said. They didn't provide details.
Finance officials called on China to move faster on efforts to let its currency, the yuan, rise in value. That would raise the price of Chinese goods on world markets. China's undervalued currency is blamed for contributing to the United States' swollen trade deficits and the loss of millions of U.S. factory jobs. "We stress its (China's) need to allow an accelerated appreciation of its effective exchange rate," the G7 said.
The G7 statement didn't mention the big drop in the U.S. dollar, which has hit a record low against the euro, giving some European companies heartburn.
Europe is beginning to feel the pinch of that sharp decline. It is making French wine, Italian fashion and German cars more expensive purchases in the United States, which is the European Union's main export market. The weaker dollar, however, benefits U.S. companies because it makes their products less expensive to European buyers.
Still, Paulson continued to stick with the United States' long-held rhetoric that "a strong dollar is in our nation's interests and currency values should be determined in a competitive marketplace."
The growing role of "sovereign wealth funds" -- secretive government-controlled investment funds -- in the global economy also was scrutinized. The finance officials suggested these funds should be more open in terms of their holdings and operations.
"We see merit in identifying best practices ... in such areas as institutional structure, risk management, transparency and accountability," the G7 officials said.
The discussion about these funds -- estimated to be worth some $2.5 trillion -- was expected to continue later at a G7 dinner Friday evening. Officials from China, South Korea, Kuwait, Norway, Russia, Saudi Arabia, Singapore and the United Arab Emirates -- all of which operate such funds -- have been invited to take part in the dinner discussion.
German Finance Minister Peer Steinbrueck, whose government has pushed for greater regulation of hedge funds, welcomed what he said was a detailed discussion of how to implement best practices. "I am very glad that we have made significant progress on hedge funds," he said.
The officials also discussed Iran's role in financing terror. "We discussed ways to deal with Iran's pursuit of a nuclear capability and ballistic missiles, the regime's vast financial support to lethal terrorist groups, and the deceptive financial tactics employed by Iran to evade sanctions and mask illicit transactions," Paulson said.
On yet another matter, the G-7 officials said they would explore a proposal to set up an international clean technology fund, which President Bush mentioned several weeks ago. Such a fund would promote clean energy projects in the developing world by financing the transition from traditional to more expensive clean-energy technology.
Associated Press writers Martin Crutsinger and Desmond Butler contributed to this report.