HORSHAM, England (Reuters) - Japan joined the U.S. push for more government spending to fight the economic crisis on Friday but G20 unity looked seriously compromised after Paris accused Washington of disregarding the urgent need for tough market regulation.

Some progress is being made: financial leaders are expected to back a call this week to double International Monetary Fund resources to help emerging economies hit by a collapse in global demand for their exports and the severing of credit lines.

But the French criticism exposed a deepening rift as finance ministers from the G20 old and emerging economic powers headed to talks south of London to thrash out what can be done to stabilise the banking system and limit the worst global downturn in decades.

The United States is insisting on the need for a strong, rapid and coordinated stimulus. Why? Because they were the last ones to put in place their plan and they are facing a bigger crisis, France's finance minister, Christine Lagarde, said.

For most of the countries in continental Europe, the urgency is to develop the rules, highlight discipline and sanctions through a new architecture of the financial system, she said in an interview published by Les Echos newspaper.

Japanese Finance Minister Kaoru Yosano, though, urged world leaders to focus on giving the global economy an immediate boost and pledging to unveil new economic stimulus measures by April.

China too said it was ready to do more if needed to spur its growth.

The immediate issues are to stabilise the financial system (and) to get out of the present deflation threat facing the world economy, Japan's Yosano was quoted as saying in Friday's edition of the Financial Times.

These two are the most important things.

The G20 group's finance ministers and central bankers meet in Horsham, south of London on Friday evening and Saturday to pave the way for a meeting of world leaders on the crisis on April 2, also being hosted by Britain.


Badly battered financial markets are taking some comfort from signs that large U.S. banks may survive without full government takeovers.

But a solution to the core problem of what to do with a mountain of troubled assets held by banks is proving elusive.

The G20 are under pressure to deliver on pledges made in November to combat the crisis and guard against future meltdowns, including commitments to regulate better.

But the run-up to this week's gathering has been dominated by disagreements over what the summit's priorities should be.

Washington is urging the biggest industrialised countries to spend 2 percent of their gross domestic product to boost demand and pull the global economy out of its tailspin, but France and Germany have rejected U.S. and British calls for fresh spending.

The international community must unite to tackle the downturn and set the path towards a sustainable future, Chancellor Alistair Darling said on Friday in a column in the Wall Street Journal.

We must do three things: boost demand, reform the global system of financial regulation, and increase the resources of the International Monetary Fund (IMF).

The G20 represents more than 80 percent of the global economy, comprising the G7 long-industrialised nations -- all of which are in or near recession -- and key emerging market economies such as China, India, Russia and Brazil.

Early in the crisis, major central banks made coordinated rate cuts to spur demand but policy actions have been largely ad hoc since. Many governments announced multiple stimulus packages and massive bank rescue plans only to see their economies sink deeper into recession and their finances fall deeper in debt.


The world economy shrank for the first time since 1945 in the last quarter of 2008, throwing millions of people out of work, and the IMF says 2009 will bring the first annual global contraction for more than 60 years.

French President Nicolas Sarkozy rebuffed U.S. calls to spend more at a news conference with German Chancellor Angela Merkel in Berlin on Thursday.

We consider that in Europe we have already invested a lot for the recovery, and that the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself, Sarkozy said.

Russia will also oppose British proposals for G20 members to set a mandatory minimum fiscal stimulus level at 2 percent of GDP and cut interest rates, a Russian delegation source said.

China's Premier Wen Jiabao sought to reassure the world on Friday that China would deliver on a promise of 8 percent growth in 2009 despite a collapse in Western demand for Asian goods, and could deploy extra stimulus spending if needed to get there.

Beijing has already unveiled a 4 trillion yuan (416.9 billion pounds) plan to expand and speed up government spending.

We have prepared enough 'ammunition' and we can launch new economic stimulus policies at any time, Wen told his annual news conference after a yearly meeting of China's parliament.

(Reporting by Reuters bureaux worldwide; Writing by Kim Coghill and Brian Love; Editing by Ruth Pitchford.)