The Group of 20 nations meeting next week is a make or break event for the global markets, investor George Soros said on Wednesday.

Unless it comes up with practical measures to support the countries at the periphery of the global financial system, markets are going to suffer another sinking spell just as they did on February 10, 2009, when the authorities failed to produce practical measures to recapitalize the United States banking system, Soros said in testimony to the Senate Foreign Relations Committee.

Soros said President Barack Obama could help make the G20 meeting a success by raising a possible solution that would involve increasing the amount that developing countries -- from Eastern Europe to Africa -- can effectively borrow from the International Monetary Fund.

The urgent task of re-inflating the global economy has to be carried out mainly by the IMF, imperfect and beleaguered as it is, because it is the only institution available, Soros said.

While the IMF's resources were likely to be doubled at the G20 meeting of big developed and developing countries, that would not provide a systemic solution for the developing world, Soros said.

But a systemic solution was readily available in the form of special drawing rights (SDRs), an international reserve asset created by the IMF in 1969 that has the potential to act as a super-sovereign reserve currency.

In addition to the one-time increase of the IMF's resources, there ought to be substantial annual SDR issues, say $250 billion, as long as the global recession lasts, he said.

While it is too late to agree on issuing the SDRS at the G20 meeting, if it were raised by President Obama ... it would be sufficient to give heart to the markets and turn the meeting into a resounding success, Soros said.

Soros also warned that if the United States failed to live up to its responsibility in helping solve the global crisis, we shall cease to be the dominant financial power.

If the global financial system falls apart, China is liable to come up ahead, he said.

While the United States wanted to re-inflate and Europe wanted to regulate, it should be possible to find common ground in the need to protect the periphery countries from a calamity that is not of their own making, he said.

Actually, we need to both re-inflate and regulate, but re-inflation is urgent and regulatory reforms will take time to implement, Soros said.

(Reporting by Susan Cornwell; Editing by Jonathan Oatis)