PARIS, May 19 (Reuters) - G7 finance ministers agreed on Tuesday on the need for action to tackle trade imbalances in a fragmented global economy, saying the current situation was unsustainable, but were light on plans for concrete measures.
Finance ministers and central bank governors from G7 countries met in Paris for a second day of talks to discuss the economic fallout from the Middle East conflict and volatility on global bond markets.
They called for the immediate re-opening of the Strait of Hormuz and the need to maintain pressure on Russia over Ukraine, agreeing common language on issues on which the group of seven advanced economies have not always seen eye-to-eye.
Hosting the talks, French Finance Minister Roland Lescure said participants also discussed diversifying the supply of rare earths and critical minerals and addressing global economic imbalances - a major theme of France's G7 presidency.
He said such imbalances were fuelling trade friction and risked a turbulent unwinding in financial markets, highlighting a pattern whereby China under-consumes, the United States over-consumes and Europe under-invests.
"We all share a common view. Those imbalances are not sustainable," Lescure told reporters at the conclusion of the meeting. He called for the International Monetary Fund to improve its monitoring and analysis, and pledged to continue discussions.
The G7 ministers agreed that their domestic agendas needed to include plans to increase investments, improve productivity and curb polices that distort markets, Lescure said.
He cited large Chinese export surpluses as part of the issue, but discussions so far in the broader G20, of which China is a member, haven't yielded much progress.
G7 MINISTERS ADDRESS IRAN CONFLICT, PRESSURE ON RUSSIA
G7 ministers said in a joint statement that it was "imperative" to ensure a return to free and safe transit through the Strait of Hormuz and ease strains on energy, food and fertiliser supply chains.
U.S. President Donald Trump said on Monday he had paused a planned attack against Iran after Tehran sent a peace proposal to Washington, and that there was now a "very good chance" of reaching a deal limiting Iran's nuclear programme.
But other G7 countries have expressed frustration that Washington and Israel launched strikes against Iran without considering the economic impact, and the foreseeable closure of the Strait of Hormuz, a vital waterway for energy markets.
Officials from three Gulf countries attended Tuesday's meeting in Paris to discuss the crisis, and Lescure said that the IMF and the World Bank should do more to support the most vulnerable countries from the impact of the conflict, especially on food supplies.
The joint statement also said the G7 countries were united in their condemnation of Russia and their unwavering support for Ukraine. However, a U.S. decision to again extend a sanctions waiver to allow purchases of Russian seaborne oil to aid "energy-vulnerable" countries for 30 more days was a source of tension in the group.
Lescure said it was for U.S. Treasury Secretary Scott Bessent to answer questions on the waiver extension, while European Economic Commissioner Valdis Dombrovskis said the issue showed that the G7 don't always agree.
"We are not always 100% aligned on everything, and this is unfortunately one of those topics," Dombrovskis told reporters.
On critical minerals and rare earths, G7 governments are trying to coordinate efforts to reduce reliance on China, which dominates supply chains vital for technologies such as electric vehicles, renewable energy and defence systems.
The ministers pledged to "deepen and expand our cooperation among G7 members and with like-minded partners" on critical minerals, including securing resilient supply chains.
Attendance on the second day of the G7 meetings was broadened out to include officials from other countries such as Brazil, India and South Korea to give more perspectives on global challenges.
But not all G7 ministers were there. British finance minister Rachel Reeves returned to London, where Prime Minister Keir Starmer held the first meeting of his senior ministers since the resignation of his health minister last week deepened a leadership crisis.
Reporting by Alistair Smout, Leigh Thomas, David Lawder, Maria Martinez and Makiko Yamazaki; Additional reporting by Dominique Vidalon and Sudip Kar-Gupta; Editing by Susan Fenton
