WASHINGTON (MarketWatch) -- The top economic officials of the wealthy Group of Seven nations said Friday that the global economy faces "a difficult period" with a raft of woes that could cause more trouble in the coming months.

"We met today amid ongoing challenges to the world economy and international financial system," the finance ministers and central-bank governors of the G7 said in a sober statement, released after their closed-door meeting at the Treasury Department.

"The global economy continues to face a difficult period," the G7 added.

The top finance officials and central bankers of the group expressed unhappiness with recent volatility in foreign-exchange trading, saying: "Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability."

These latest comments will be dissected by the foreign-exchange markets. When asked for clarification, Treasury Secretary Henry Paulson said that the wording simply reflected recent developments. "If you never changed a communiqué language no matter happened around the world, it would be pretty meaningless," he remarked.

“ 'It is not a pretty picture for these leaders. They enjoy their work much more when there is good news.' ” — Lex Rieffel, Brookings Institution

Paulson said that he reiterated his support for a strong dollar to his G7 colleagues.

The G7 also urged banks to disclose "in their upcoming midyear reporting" full information about their risk exposures, write-downs and the fair-market value for complex and illiquid instruments.

The leaders went into the meeting Friday with the stated goal of rebuilding confidence and stability in financial markets. The group consists of Canada, France, Germany, Great Britain, Italy, Japan and the United States.

The G7 must "do whatever it takes to restore stability to markets as quickly as we can," said Alistair Darling, the British chancellor of the exchequer in an interview with reporters.

Before the meeting, experts said that they expected a public show of confidence and unity from the G7 leaders, with disputes over the weak dollar, the Chinese trade imbalance and anxiety over the duration of the current credit crunch to be swept under the rug.

"The main goal of the G7 at these meetings is to avoid any sense of controversy or any sense of alarm that might further roil the markets. They have to maintain a public front of confidence and camaraderie," said Fred Bergsten, the head of the Peterson Institute for International Economics, in an interview on Bloomberg Television.

No happy faces

But the G7 emerged from their meeting revealing some of their anxieties. "The turmoil in global financial markets remains challenging and more protracted than we had anticipated," the statement said.

The leaders had little to cheer about, saying only that they are positive about the long-term. "But near-term global economic prospects have weakened," the statement added.

The list of woes in the grim statement was long. The U.S. housing market continues to weaken; global financial-market conditions remain stressed, while oil and commodity prices remain high and have rekindled inflation.

"It is not a pretty picture for these leaders. They enjoy their work much more when there is good news," said Lex Rieffel, an analyst on the international economy at the Brookings Institution.

Bergsten said that the G7 should have contingency plans for a possible freefall in the dollar given the Federal Reserve's dramatic reductions in short-term interest rates, expectations of anemic U.S. growth and the massive U.S. trade deficit.

Even Paulson was more downbeat than usual. He told reporters at a press conference after the meeting that the first two quarters of the year would be "tough."

"The first quarter was a tough quarter and I expect the second quarter to be a relatively tough quarter," he added. "There may be more bumps in the road."

The Treasury secretary is usually upbeat about the economy, fearing that any negative comments that he made could further depress consumer confidence. But Paulson noted that none of the G7 leaders believes the global economy could somehow be "decoupled" from the U.S. slowdown.

Later this evening, the G7 will meet with 10 leaders of global banks, investment banks, and the head of TIAA-CREF.

Attending the dinner will be Josef Ackermann, the chief executive of Deutsche Bank AG DB, -1.89% ; Herbert Allison, the retiring chief of TIAA-CREF; Sir Win Bischoff, the chairman of Citigroup Inc. C, -2.12% ; Bob Diamond, head of Barclays PLC's BCS, -0.60% investment-banking division; Brady Dougan, chief executive of Credit Suisse Group CS, -0.70% ; Laurence Fink, chief executive and chairman of BlackRock Inc. BLK, -0.68% , Richard Fuld, chief executive of Lehman Brothers Holdings Inc. LEH, ; John Mack, chief of Morgan Stanley MS, -2.35% ; Yasuhiro Sato, chief executive of Mizuho Corporate Bank; and Richard Waugh, chief executive of Toronto-based Scotiabank.

Darling said that it was important for the G7 government leaders to meet with the bankers "to get an assessment of where they are at the moment, but also what we can do to restore confidence."

Europe unhappy on currency

European officials made it clear going into the meeting that they wanted stronger language on currency.

E.U. economics minister Joaquin Almunia complained in a speech Friday afternoon before the start of the G7 meeting that Europe was bearing "more than a fair share" of the burden in the adjustment in global imbalances.

In simple terms, this meant that the euro is overvalued, he said.

The dollar, after posting a modest rebound earlier this month, came under renewed pressure this week -- falling to yet another new all-time low against the euro, with the shared currency rising as high as $1.5911 on Thursday. The dollar also saw renewed weakness against the Japanese yen.

The weak dollar has raised hackles in Europe, where officials say it has undermined their exports.

Before the meeting, economists said market fundamentals probably aren't right for the G7 to attempt coordinated intervention in an effort to end the dollar's slide. After all, fears remain of a deepening U.S. downturn. The Fed is expected to further cut interest rates, while the European Central Bank has left rates on hold and isn't expected to follow through with cuts anytime soon, with near-term inflation pressures surging.

In fact, the ECB may welcome the strong euro for its inflation-damping effects, some economists said. U.S. officials, while paying lip service to a "strong dollar," see the weaker currency as a boon to their own exporters.

"Unfortunately, a turn in the U.S. dollar at this point is not in the best interest of either party," said Kathy Lien, chief strategist at DailyFX.com. "If the diverging monetary-policy directions of the Federal Reserve or the ECB tell us anything, it is that there isn't much spirit for cooperation." See full story.

The G7 agreed on proposals to keep closer tabs on global commercial and investment banks and make sure that these institutions maintain access to capital. See full story.

The roots of the current global market turmoil are in the U.S. subprime-mortgage sector. But major banks soon found that their plans to raise capital in tough times were inadequate, because there were no buyers for the complex derivatives they had on their books.

The G7 endorsed a plan negotiated under the auspices of the Financial Stability Forum, a little-known umbrella group of the world's top central bankers, supervisors and other financial officials.

Measures include risk management at banks, more transparency and common accounting. In addition, the valuation of structured products, reform of credit-rating agencies and cooperation among supervisors was covered.