Highlights: G7 meets in Canada's Far North

IQALUIT, Canada (Reuters) - Following are comments by finance ministers and other officials gathering in Canada for a meeting of the Group of Seven industrialized nations, focused on financial regulation and economic recovery.

GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE

ON MAKING SURE GREECE STICKS BELT-TIGHTENING PLEDGES

"The EU has imposed heavy measures on Greece, like an austerity and savings program, and it will watch closely that Greece acts according to that."

CANADIAN FINANCE MINISTER JIM FLAHERTY

ON CONCERNS IN MARKETS ABOUT EURO ZONE DEBT LEVELS:

"Yes, in fact we already had preliminary discussions on that subject. The European (Central) Bank, of course, is here and there are concerns about Greece."

"Fundamentally this is an issue for the European Union but a number of countries represented by the ministers and central bank governors here are EU countries so this is a concern I'm sure we'll talk a bit tonight."

ON RISKS OF EURO ZONE DEBT PROBLEMS TO GLOBAL ECONOMY

"I think we have to be very mindful of the potential failure of domestic economies and of the persistence of some toxic assets in some banks, we need to fix the banks."

ON BANK Capitalization

"There are a number of proposals with respect to bank capitalization. We think the Canadian model has worked and we are advocating the Canadian model and Canadian standards. There is some debate about what one takes into account in determining the capitalization of banks, we have to make sure we are comparing apples to apples and we will have a discussion about that, I am sure."

ON CHINA AND CURRENCIES

"One of the major discussions we are going to have this evening and tomorrow is a discussion about the global economy. One of the major concerns about the global economy is the issue of global imbalances and an important aspect of that is that some of the Asian economies have relatively rigid currencies and some of the other economies, market economies, have floating currencies. This is an issue which cannot be avoided, it is a G20 issue more correctly, but it is an issue also that concerns Western industrialized countries that are represented in the G7.

"We are not having a communique, we are trying to get back to the origins of the G7 and the origins of the G7 (were) a fireside chat where the central bankers and the finance ministers get together. We are not going to have detailed statements that are prepared by officials, we are going to have a frank discussion about what concerns us and others and this is what concerns all of us -- the issue of currency imbalances."

ON U.S. (VOLCKER) PROPOSAL

"There are differences of action that have occurred between several countries with respect to that issue. We all agreed that there needs to be some protection of the public with respect to failures of systemically important institutions. It is not something that happened here in our country in Canada fortunately, but we need to consider the kind of moral hazard that happens with institutions thinking they will be bailed out by taxpayers internationally. We will work on that to try to have a more uniform approach.

ON EXIT STRATEGIES

"We are all agreed that continued stimulus is necessary, that we have not seen entrenched growth, we have not seen an adequate replacement of public demand with private demand. That's the first part. Second part is that there is concern with deficit levels and when stimulus ends, how do we exit from that? (In Canada) we will continue to stimulate the economy this year but the plan in the Canadian situation is to get back to a balanced budget. We are working on that. It is a thought that is shared by other members of the G7, including the U.K and the U.S."

ON BANK REFORMS

"Several countries have made banking sector proposals that are not entirely consistent. So it's a good reason to gather, it's a good reason to talk about it."

(Reporting by Reuters team at the G7 meeting; editing by William Schomberg and Jeffrey Hodgson)