The world's eight leading industrial powers voiced confidence in an economic recovery on Tuesday at the anticlimactic end of their annual summit, which was dominated by efforts to patch up differences over Iraq.

In a final statement, the Group of Eight nations focused on the need to press ahead with structural reforms and greater flexibility in the rich nations' economies despite resistance highlighted by public sector strikes in host country France.

Although the statement did not mention currencies, French President Jacques Chirac said all agreed currency stability was a key factor for growth and were monitoring market movements closely after the dollar's recent sharp fall against the euro.

The leaders sought to close a bitter transatlantic dispute over the recent U.S.-led war on Iraq, which half the G8 opposed, saying all now agreed the time had come to reconstruct Iraq.

Summit host Chirac could not resist restating his view that the U.S.-led war to oust Saddam Hussein was "illegitimate and illegal," adding the United States might wage war alone but it needed others' help to build peace.

"Major downside risks have receded and the conditions for a recovery are in place," the leaders of the United States, Japan, Russia, Germany, France, Britain, Italy and Canada said in a statement issued a day after President Bush left the summit early for Middle East peace talks.

"We are confident in the growth potential of our economies."

Economists said the summit conclusion was not just wishful thinking. "There are some grounds to be more hopeful with regards to the recovery process," said Audrey Childe-Freeman, European economist at CIBC World Markets in London.

Several thousand demonstrators blocked the main bridge over the Rhone river in the Swiss city of Geneva, 40 km (25 miles) from the summit site, and clashed for a third night with police.

The G8 talks were held behind a massive security cordon at the French spa town of Evian, on the other side of Lake Geneva.

Chirac apologized to the Swiss people for the violence in Geneva and Lausanne by "gangs of thugs and wreckers" who he said were not true critics of globalization but simply vandals.

"OTHER MEASURES"

The leaders pledged renewed vigor in the fight against terrorism and the spread of weapons of mass destruction, singling out the nuclear programs of North Korea and Iran as of particular concern.

Bush won an endorsement of his priority for the fight against WMD, if not of his policy of pre-emptive strikes against such threats or his proposal to stop and seize shipments of suspected WMD or missile parts.

A dispute reminiscent of the clash over Iraq erupted over their reference to the availability of "other measures in accordance with international law" if treaties, inspections, export controls and diplomacy failed to head off the threat.

The United States and Britain saw this as a clear, if veiled, reference to the possible use of force. But Chirac said that interpretation was "extraordinarily far-fetched ... There was never any question of using force against anyone in any area."

Discussing the threat from North Korea, Canada's Prime Minister Jean Chretien summed it up by saying: "We don't have a solution clearly in mind at this moment."

The summit began an uneasy process of healing wounds opened by the Iraq crisis, when France, Russia and Germany united to deny Bush a United Nations mandate for military action.

In a carefully worded passage avoiding any retroactive endorsement of military action, the leaders said: "Our shared objective is a fully sovereign, stable and democratic Iraq, at peace with its neighbors and firmly on the road to progress."

The White House said Bush had expressed support for a strong dollar to the G8, but foreign exchange markets, uncertain about Washington's true intention, were largely on hold awaiting an expected European Central Bank interest rate cut Thursday.

Prime Minster Junichiro Koizumi said Japan's yen was overvalued and backed a strong dollar.

DEVELOPMENT FOCUS

Chirac sought to give the summit a special emphasis on development in poor countries, inviting an expanded cast of leaders from Africa, Asia, the Middle East and Latin America, all of whom coincidentally opposed the war in Iraq.

He challenged Bush to invite the major developing nations to next year's G8 in the United States to keep the spotlight on issues such as fighting deadly epidemics, improving access to clean water and reducing Third World debt.

But Western and African development campaigners voiced deep disenchantment at the meager outcome of the Evian summit.

"Not only are there no firm commitments, even their rhetoric is watered down compared with last year," said Phil Twyford of British charity Oxfam. "Trade is missing in action."

The leaders appeared to have made scant progress on removing trade barriers. While reaffirming their commitment to conclude global trade liberalization talks on time by the end of 2004, they sidestepped transatlantic disputes holding up progress

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