When the Federal Reserve chairman steps up to speak in the mountains of Wyoming on Friday, he faces giant expectations to deliver a plan to steer the developed world away from another damaging recession.

He is quite alone.

European leaders are squabbling over who pays the bills for their sovereign debt crisis, leaving the European Central Bank hamstrung. Japan is in political paralysis lurching from election to election. And the world's fast-growing emerging economies -- China, India, Brazil or Russia -- prefer to criticize from the sidelines rather than take up the mantle of leadership.

In the United States, political leaders are enmeshed in a deeply divisive ideological war over the role of government, scarcely able to agree on basics of raising the debt ceiling.

As David Resler, strategist at Nomura, said bluntly of Bernanke: He is the last hope of a desperate market.

The public has totally lost confidence in Congress to do anything coherent or useful, said Mark Gertler, economics professor at New York University.

By contrast, the Fed is the only major policy player that operates independently of politics and is thus just about the only government institution in which the markets have any faith, he said. Partly for this reason and partly because of his proven skill as crisis manager, the world is looking for him to deliver.

Yet Bernanke's capacity to deliver on such heightened expectations is greatly constrained, not least by growing criticism at home from the Republican right that Fed activism is debasing the dollar.

In Phase One of the global financial crisis that began in 2007, the Fed stabilized dysfunctional financial markets by flooding the system with money, which was easy to do when it had plenty of room to slash interest rates to near zero.

In Phase Two, the Fed focused on combating deflationary pressures in 2009 and 2010 by buying up bonds to force investors into riskier assets. It succeeded.

But Phase Three, achieving lift-off for an economy that is stuck on the runway, is proving much harder -- and the tools left at the Fed's disposal are fewer with limited or even questionable impact.

Moreover, they are not designed to tackle the complexity of the challenges that plague the global economy.

Unlike 2007-2009, the epicenter of the current financial market turmoil lies not in the United States but in Europe, and it is government balance sheets not banks that are causing upheaval. Europe's fragmented political leadership has proven itself ill equipped to address the government debt strains quickly, and there is little that Bernanke can do about that.

Part of the problem in the past two weeks that led to the excess volatility in markets was the realization that no one is in charge, and that puts a lot of weight on Bernanke and the central bankers, said Kenneth Rogoff, a professor of economics at Harvard University.

NOT 2008

Three years ago, the financial technocrats were able to swoop in and deliver a strategy to save the world from financial crisis.

Bernanke, the soft-spoken professor of the Great Depression, and Hank Paulson, the swash-buckling Wall Street titan turned U.S. Treasury secretary under President George W. Bush, worked alongside Group of 20 colleagues to unleash roughly $5 trillion in rescue measures.

They slashed interest rates, bought up bad debt, pumped capital into banks and launched government stimulus programs. Financial markets recovered and growth took off.

They were temporary fixes. The hope was that economic growth would reach lift-off speed and become self-sustaining for long enough to pay off the accumulated debts and bailout costs.

Instead, growth is stumbling in Europe and the United States. The bad debt that piled up in banks was transferred to government balance sheets, pushing out budget deficits which markets now are less willing to finance in already overburdened countries.

Rogoff said the current economic problems stem from government leaders failing to confront the harsh reality of how long it would take to work through a deep debt crisis.

At first they took the easy route, he said. They temporized and thought it was a good strategy at the time -- guaranteeing everything, bailing out the financial system, put the problems on ice and hope that future growth would ameliorate the problem.

But it was a very risky one because it deepened the financial crisis. Their approach is coming back and boomeranging in that because the debt problems are not going away, they are getting worse, they cannot keep kicking the can down the road. The ability to temporize is fading fast, he said.

The rocky climate leaves Bernanke under pressure to lay out a grand plan.

He has given no indication that he will deliver solutions on Friday when he addresses an annual central bank conference in Jackson Hole, Wyoming. Instead, he is expected to downgrade his economic assessment, affirm that an easy monetary policy remains firmly in place and explain the risks and benefits of the various balance sheet options the Fed could use, should economic conditions worsen in the months ahead.

Mohamed El-Erian, chief executive of Pacific Investment Management Co, operator of the world's largest bond fund, said Bernanke would be wise to go one step further. He could explain that any monetary steps to be truly effective should be reinforced by government measures -- namely a comprehensive package of structural reforms such as an overhaul of the tax code and labor market, infrastructure investment, pension and healthcare reforms.

Bernanke could use his speech not only to lay out monetary options but also be the warm-up act for President Barack Obama's unveiling of his jobs package in September. He could convince politicians they must join in lifting growth.

Anything beyond this would run the risk of the Fed building another costly bridge to nowhere. El-Erian said in an economics blog on Thursday.

(Editing by Leslie Adler)