Policymakers agree not time to withdraw stimulus-UK

By Matt Falloon

LONDON, July 8 (Reuters) - Policymakers agree the global economy is too weak to remove stimulus measures yet and they will consider whether more work is needed to shore up banks at this week's summit in Italy, British officials said on Wednesday.

Germany is expected to push for commitment from leading economies at the three-day G8 meeting to pull swiftly out of expensive economic support policies when recovery comes, but resistance is likely from Britain, the United States and Japan.

"We should start to prepare exit strategies but we start implementing them when you are sure you have got a recovery that is entrenched and self-sustaining and I don't think anyone is saying we are at that point yet," one British official said.

"There's a general view that there are signs of stabilisation in the global economy but it's very uncertain. We need to maintain the policies we have at the moment." Analysts expect leaders from the world's leading economies to agree that the worst is over for the global economy but there may also be a recognition that even more work could be needed to get banks lending again -- a key part of any sustained recovery.

Economists say recessions across the developed world could be over by the end of the year but there is high uncertainty about the strength or durability of the recovery.

"Recently there have been some signs that the world economy may not be returning to health as quickly as some people thought it was a couple of months ago," the official said.

"A number of countries have taken action (on banks) but I think the leaders will want to discuss whether it's been enough, whether more should be done." Another official said there was "no room for complacency", pointing to risks to recovery from rising oil prices, banks and trade.

"There remains some evidence of protectionist barriers being put up," he said.

As such, no breakthrough on stalled global trade talks should be expected this week but the Italy summit represented a good chance to get the ball rolling again, the officials said.

An agreement on specific climate change emissions targets for the world also looked unlikely because of large differences over how to measure those targets and because developing countries need more time to agree on strategies.

"You need to see this as a stage in which you get a preliminary agreement and you start to narrow the difference," the first official said. "There's more work to do."

There was unlikely to be any significant consideration of a proposal to dislodge the dollar as the world's main reserve currency -- an idea likely to be pushed by China and other major emerging economies.

"I don't think there is going to be a discussion of a proposal for a global reserve currency," the first official said. (Editing by Stephen Brown)