G20 Horsham meet sees widening gap between the US and Europe

The gulf between the US and the Europe seems to have widened at the G20 finance ministers and Central Bank chiefs meeting which aims at finding a solution to pull the leading economies of the world out of recession, sources said.

Amid the growing signs of the divide, Britain's chancellor Alistair Darling who is chairing the meet admitted that differences remained between the participants, downplaying hopes that the summit could provide a definite agreement on the solution for the crisis.

The admission came as China indicated its concerns over the level of US' public debt.

The G20 finance ministers' summit held at Horsham, West Sussex is intended as a curtain-raiser for the heads-of-state meeting at the Excel Centre in London's Docklands.

According to sources, the concluding statement would commit to a radical new programme of extra borrowing and spending to drag leading economies out of recession. The US Treasury is pushing hard for a commitment from rich countries to spend around 2 per cent of their gross domestic product on rescue measures.

However, German chancellor Angela Merkel appeared to oppose this understanding, saying ahead of a meeting with the prime minister Gordon Brown that the primary issue at hand is regulation rather than pondering over fiscal stimulus.

"The issue is not spending even more but to put in place a regulatory system to prevent the economic catastrophe that the world is experiencing from being repeated," she said.

Darling said such clashes were expected.

"Obviously if you have 20 people sitting round a table, there will be differences," he said.

"I think there is a lot of common ground. On fiscal stimulus, for example, the US has, we have, the French have, the Germans have."

World Bank president Robert Zoellick cautioned that the extra cash funnelled into the world economy will be no more than a "sugar high" unless troubled banks are rescued.

"The IMF needed more funds to help rescue struggling nations, since 2009 is shaping up to be a very dangerous year," he said.

Opening the session on Saturday morning, Chancellor Darling had said he was "quite sure" progress would be made on the
meeting's three main aims - supporting economies, getting bank lending going again, and making sure the whole world benefited from the action taken.

Darling, who is chairing the meeting said, "Generally, I think we are in agreement on the issues. "Of course, if you have 20 people in a room, there  will be differences. Each country has to decide what to do to their economies."

On BBC Radio Four's Today programme, he said the people recognised that the world was facing "extraordinary circumstances." The meeting needed a commitment that no country would "hold back" from doing whatever was necessary to support their economies, he stated.

"It's not just an economic necessity, but when you consider that possibly 90 million people across the world may go back into poverty, it's also a moral imperative," he said.

The meeting is also likely to focus on the need for tougher regulation of banks.

The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.

US Treasury secretary Tim Geithner has proposed tripling the IMF's resources to 750 billion dollars to ensure it can help all those caught in the crisis.

Japan has already offered 100 billion dollars, while the EU has backed an increase to 500 billion dollars and is also considering a loan of 100 billion dollars.

However, Brazil, Russia, India and China - known as the BRIC countries - said they would not contribute extra cash unless they were given extra voting power.

"We will only agree to increase capital to the IMF after the reform in the (IMF) quotas is carried out, because there is still an imbalance in our participation in the IMF," Brazilian finance minister Guido Mantega said after meeting officials from the BRIC countries.

As per the IMF's voting structure the US and the Europe have a greater say.