World finance leaders will seek to assure markets on Friday that the global economy is recovering despite the cloud cast by debt-troubled Greece and its request for a huge bailout.
A draft communique from finance chiefs from the Group of 20 nations said the global economy is regaining its footing, although at an uneven pace, a G20 source told Reuters.
G20 members, meeting at the International Monetary Fund's headquarters, will stress the need for rebalancing that growth -- meaning big surplus countries like China must consume more and be more flexible on currency rates, while the indebted like the United States need to tighten up spending.
Despite the signs of impending recovery, a G20 source said the IMF has cautioned those countries that they were too optimistic when they recently submitted estimates for their economies in the next few years.
Without policy changes, swelling surpluses in some countries and soaring debt in others risk getting worse, the IMF told the G20, according to the source.
The result of this exercise is that, according to IMF, growth expectations sent by almost every country are too optimistic, and there are risks that global imbalances will become more acute, the source told Reuters.
Troublesome issues in front of G20 officials vary from whether to tax banks to make them pay for bailouts to how to persuade China to let its yuan currency appreciate.
In a sign of the sensitivities over the currency issue, which has a rising number of countries pressuring Beijing to let its yuan strengthen in value, the communique will not specify actions for individual countries but only refer to a broad mechanism for balancing growth, the G20 source said.
The meeting was overshadowed by Greece's appeal to its European Union partners and the IMF for emergency loans of up to 45 billion euros ($60.5 billion), potentially the biggest-ever bailout of a country.
The G20 source said Greece has asked for only part of the aid for now.
PREPARING FOR GREEK BAILOUT
Finance officials from Europe stressed that other euro zone countries with budget deficits and slow growth rates were not at risk of a Greek-style crisis.
European Central Bank Governing Council member Ewald Nowotny dismissed as unfounded speculation that other southern European countries might be discussing aid.
The Group of 20 rich and emerging countries, meeting before semi-annual meetings of the IMF and World Bank at the weekend, are seeking common ground on a variety of reforms to prevent a repeat of the credit crisis that led to a global recession.
Some are controversial and all require give-and-take, from settling differences over how to regulate banks to giving fast-growing emerging economies more clout.
The G20 has supplanted the smaller G7 club of advanced economies, an acknowledgment of the growing power of countries such as China and Brazil and that the rich world now needs their help.
G7 finance ministers met separately on Thursday night but issued no communique in a reflection of the group's diminished standing.
TAXES A DIVIDING LINE
The sharpest divisions were over bank taxes, with Canada strongly opposed and Britain pushing for support. Finance ministers are expected to discuss two bank tax ideas proposed by the IMF. The Fund will then present a report to G20 heads of state, who are meeting in Toronto in June.
There is a lot of resistance to the tax on banks. Canada is not isolated, a G20 source said.
U.S. President Barack Obama on Thursday chastised Wall Street for resisting an overhaul of U.S. financial regulation.
There is widespread agreement that global cooperation in pumping some $5 trillion in stimulus money into the global economy shook it out of the torpor it entered in late 2007 and 2008 amid a U.S.-led financial crisis.
But the global government spending has left many rich countries with debt burdens approaching World War Two highs.
The issue of rebalancing global growth also is loaded with potential pitfalls.
Reducing imbalances means China and other export-dominated economies must adopt policies to support domestic growth, which means letting currencies rise more rapidly and investing in social safety nets to try to promote consumer spending.
That could cool growth in the short run and make it hard to create sufficient jobs for a rapidly growing population.
Fellow developing economy heavyweights Brazil and India, plus the European Union, have called for a stronger yuan in recent days, although officials arriving in Washington ahead of the G20 meeting made few comments about the Chinese currency.
(Reporting by Glenn Somerville; Editing by Padraic Cassidy)