Financial chiefs from the world's seven richest countries on Saturday stopped short of recommending action on energy costs, in part because of differences on how severe an impact of oil price rises would have on their economies.

"Prospects are favourable and although risks remain, such as energy prices, overall the balance of risks to the outlook has improved," G7 officials said in a communique after their meeting in Washington.

European concern

European ministers appeared more anxious than their US counterparts about the threat from oil.

"The principal risk is the oil price risk," said French Finance Minister Nicolas Sarkozy.

His German counterpart Hans Eichel said he hoped planned output cuts by the Organisation of Petroleum Exporting Countries would not become a reality.

"The principal risk is the oil price risk"

Nicolas Sarkozy,
French Finance Minister

But amid the apprehensions, there was overarching contentment with world growth this year that is forecast to come in at its fastest pace in four years.

The ministers sounded more sanguine about the economy's fortunes, saying the recovery "continued to strengthen and broaden" since they last met in Florida in February.

The G7 – the United States, Britain, Canada, France, Germany, Italy and Japan - met as key economies such as the United States and Japan show persuasive signs of gaining momentum.

Besides energy prices, the potential impact of higher US interest rates had the G7 member nations apprehensive.

Brundesbank Vice President Juergen Stark said: "There are signs that the present situation of globally low interest rates does not necessarily have to persist."

The G7 members agreed to work for "sustained medium-term fiscal consolidation" as growth picks up, an apparent reference to tackling big budget deficits.