Expectations were modest for a meeting of Group of Seven finance ministers and central bankers that began over dinner on Friday night in the face of a stubbornly hard-to-advance agenda from Chinese currency reform to a debt relief package.

Energy costs were a key topic for talks that resume Saturday morning while a steeped-up Bush administration campaign to get China scrap its currency's tight tie to the US dollar would be an important sub-text.

A British Treasury official said pricey oil would "dominate" the talks. "It is one of the biggest risks to the economic outlook," the official said.

Germany's Finance Minister Hans Eichel agreed, saying the global economic situation looked worse than "half a year ago."

But US Treasury Secretary John Snow told Bloomberg television the G7 was preparing for an era of more costly energy and could handle recent rises that topped $58 a barrel before falling back to around $50.

"These prices are out of line and I'm confident there will be adaptations to these prices, both in terms of the supply side and the demand side," Snow said.

Bank of Italy Governor Antonio Fazio took comfort from the fact that the G7's biggest economy, the United States, seemed on solid ground but declined comment on Italy's performance.