By Jan Strupczewski
BRUSSELS, April 21 (Reuters) - The economic crisis may be at its worst now and a recovery could follow unless downside risks materialise, euro zone countries are likely to tell a Group of Seven meeting on Friday, a G7 source said.
The source also said the meeting of finance ministers and central bank governors in Washington was likely to declare that the G7 would do whatever it took to stabilise the financial system, were some unexpected disaster to happen.
"On balance the better news is now outnumbering the catastrophic news, which is a welcome change," the G7 source said. "Unless something very bad happens, we may have reached bottom now."
"There are considerable risks and if they materialise the situation could be considerably worse before it gets better. If they don't, then indeed we could be heading for a recovery."
The G7 consists of the United States, Canada, Japan, Britain, France, Germany and Italy.
However, the source noted that Japan or even the United States may not share the euro zone view. A second G7 source also said the G7 was likely to be cautious in its communique.
"They will probably say that in some countries there are good signs but they will not say the crisis is over. They will probably say things are going a little bit better but avoiding to exaggerate," the second G7 source said.
The first source said there was a growing consensus, including the United States, that the fiscal stimulus already agreed to kick-start the economy needed time to work and that one should wait before embarking on more stimulus.
"We should definitely wait now, for three months, until the summer, before we rush into another round of huge deficit spending. And I think there is a consensus about that," the source said.
"Also in the U.S. it seems to be sinking in that there is no bottomless pit where they can get money out until the end of days," the source said. "So even in the U.S. there seems to be a realisation that there is a limit to fiscal deficits and public debt."
The source said the final communique from the G7 meeting in Washington was likely to be very similar to the one issued in February after the last meeting in Rome.
"I would be surprised if there were any major changes to the Rome text," the source said, adding it was likely to contain a reference to excess currency volatility being bad for growth.
The source also said that the last statement's remarks on the need for China to let its currency appreciate were still true now.
The meeting was likely to discuss remarks by Chinese central bank Governor Zhou Xiaochuan in March, outlining how the dollar could eventually be replaced as the world's main reserve currency by the International Monetary Fund's Special Drawing Rights (SDRs).
"We don't really understand what the purpose of it was," the source said. "We don't understand where the Chinese benefit lies in talking down the dollar. Because effectively that is how you would interpret it. You would expect the Americans to do this but not the Chinese, considering their dollar-denominated asset holdings," the source said.
"We are not particularly worried by it, just puzzled by it," the source said.
China's representatives could be asked about this by European Central Bank President Jean-Claude Trichet or Economic and Monetary Affairs Commissioner Joaquin Almunia during a G20 meeting that directly follows the G7, the source said.
G20 finance ministers themselves would be trying to seek ways to put into action the pledges made by G20 leaders at an April 2 summit in London.
"The finance minsters were not consulted before or during the talks on some of these decisions and some of the finance ministers were very surprised to see this and have since been wondering how to translate this into concrete actions," it said.
(Reporting by Jan Strupczewski, editing by David Stamp)