The world's top economic powers, confidently predicting that the global economy was on the mend, agreed Saturday on better cooperation to choke off terrorists' financing.

They also released a plan to improve the handling of international bankruptcy cases such as Argentina's massive debt default.

Finance officials from the United States, Japan, Germany, France, Britain, Italy and Canada said in a joint statement that they were optimistic that last year's global slowdown, the worst in a decade, had ended.

"Economic recovery from the slowdown is under way," said the officials from the seven wealthy nations. They said they found "prospects for the global economy more positive than a few months ago."

The statement was issued after morning discussions led by Treasury Secretary Paul O'Neill and Federal Reserve Chairman Alan Greenspan.

Outside the International Monetary Fund and World Bank buildings, scores of officers stood guard behind waist-high metal barricades near large black bags containing their riot gear. All around the capital, thousands of protesters rallied peacefully against U.S. policy in the Middle East, Afghanistan and Colombia.

Ryan Sarni, a 21-year-old student at Ohio-Wesleyan College, said, "We're all working under the same banner of pro-choice, pro-environment, pro-worker and pro-women. There is just diversity of tactics and viewpoints here."

There were no reported incidents.

O'Neill told reporters that he viewed the finance officials' discussions, held in advance of IMF and World Bank weekend meetings, as a major success. He cited agreement by U.S. allies to intensify efforts to combat terrorist financing, a drive the United States has led since Sept. 11.

The group said for the first time that it would make a joint designation of terrorist financing sources rather than just following the lead of U.S. authorities.

The group said there were growing signs of an economic recovery, but that "downside risks" remain.

They cited the recent surge in oil prices with heightened tensions in the Middle East and the deepening economic crisis in Argentina. That country was forced in December to default on its massive $141 billion foreign debt, the biggest government default in history.

To better handle such crises, the G-7 leaders adopted a plan that increasingly would let a majority of creditors agree to accept less than full payment in the event of a financial crisis such as Argentina's.

This was seen as a victory for the Bush administration, which had promoted the idea.

The administration, in a compromise, agreed to support additional study by the IMF a broader proposal that would give the lending agency more power to oversee international bankruptcy cases.

The joint statement did not mention another dispute: An effort by the United States to increase World Bank aid in the form of grants, rather than loans must be repaid.

European countries contend that proposal would reduce the amount of money available for future assistance to the world's poorest nations unless wealthy countries agreed to increase their support.

The plan on dealing with economic crises reflected much more consensus among the G-7 countries. It was likely that the IMF's policy-setting panel, which was to meet later Saturday, would endorse the approach.

On terrorist financing, officials urged the lending institutions to include a check on efforts to fight such financing in their periodic assessments of countries' economic programs.

The IMF said this week that only 40 of its 183 member countries had responded to a request for reports on efforts they were making to deny suspected terrorists access to money.

Meanwhile, Spanish Finance Minister Rodrigo Rato, leading a delegation from the European Union to the talks, said he believed the IMF and Argentina were close to a deal. He said the country's provincial governments would have to better manage ballooning budget deficits.

On Friday night, the G-7 group invited officials from India, Dubai, the United Arab Emirates, Saudi Arabia and Switzerland to discuss terrorist money. French Finance Minister Laurent Fabius said he sensed "a real eagerness" to promote greater openness in tracking money flows.

"It must not stick to some particular items, but it must be an effort toward greater transparency in the field of finance," he said.

The global money talks were being held against a backdrop of the U.S. war on terrorism in Afghanistan, hostilities in the Middle East and political turmoil in Venezuela that have raised oil prices.

Foreign aid has received new attention in the wake of the Sept. 11 attacks as the United States and other wealthy countries try to intensify efforts to combat global poverty, which is seen as breeding terrorism.