"The stabilisation of the global economy and financial markets remains our highest priority," according to a draft declaration of G7 finance ministers obtained by AFP as the delegates held high-stakes talks in Rome.

So far, "we have collectively taken exceptional measures to address these challenges," it said, without specifying concrete proposals on the table at Saturday's second and final day of talks.

"We affirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector," the draft said.

It also reflected comments by several top delegates that protectionism -- when countries take measures that favour their own economies at the expense of others -- was a threat to stability.

"G7 remains committed to avoiding protectionist measures, to refraining from raising new barriers" to world trade, the draft said.

The document hailed stimulus actions taken by other countries, singling out China, which it also praised for a commitment to more flexible exchange rates that should lead to the appreciation of the yuan.

More generally, the G7 said it was concerned by excessive volatility in foreign exchange markets.

The financial leaders were working to hammer out an action plan to confront deepening recession, amid mounting warnings of the talks' grave economic stakes.

International Monetary Fund chief Dominique Strauss-Kahn said advanced economies were in a "deep recession" ahead of the crisis talks in Rome.

Delegates from the G7 grouping of Britain, Canada, France, Germany, Italy, Japan and the United States plus Russia were comparing notes on stimulus packages and seeking consensus on the next steps, including possible new rules for global finance.

The Italian finance ministry said in a statement that as president of the talks it would also push for "a minimum basic set of rules" on world financial regulation and discuss "food security issues."

France's Finance Minister Christine Lagarde said Friday she wanted to raise the issue of financial traders' pay.

Another French source said the meeting's final statement was also likely to contain details of so-called "legal standards" for world finance proposed by the Italian presidency.

The world financial crisis has exposed "fundamental weaknesses in the international financial system, and urgent reforms are needed," the draft said.

A broader grouping of 20 major and emerging economies is due to meet in London in April to discuss financial reform -- an indication of the growing clout of rising economic powers such as China.

More grim data emerged on Friday showing that the eurozone economy slumped by 1.5 percent in the fourth quarter of 2008. The European Union overall and several individual EU countries -- including G7 host Italy -- are also in recession.

Ahead of the talks, several delegates voiced alarm over protectionism, citing measures including recent proposals by France and the United States, which they fear may undermine efforts to ease the downturn.

German Finance Minister Peer Steinbrueck warned Friday that "the world (should) not make the same mistake that it made in the 1930s" at the time of the Great Depression, when protectionist measures prompted tit-for-tat reprisals that deepened the global crisis.

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