Merkel presses G20 to make tangible progress

BERLIN (Reuters) - The Group of 20 economic powers must produce concrete results at a summit next week that go beyond the agreements they reached at a meeting in April, German Chancellor Angela Merkel said on Friday.

The Pittsburgh G20 summit, the third since the demise of Lehman Brothers a year ago which raised fears of another Great Depression, is set to focus on tougher financial regulation and what comes next, now that there are tentative signs of recovery.

"It is very important that we get concrete results that go well beyond what was agreed in London," Merkel told a news conference in Berlin.

The G20 agreed in London to "extend regulation and oversight to all systemically important financial institutions, instruments and markets" and Merkel wants world leaders to agree a regime to give this pledge substance.

A new framework for financial market regulation should be in place by the middle of next year, she said, pressing Germany's drive for tighter regulation to rein in the unbridled capitalism it blames for the global crisis.

World leaders are especially sensitive to the fact that many voters believe big bonuses led to excessive risk-taking in the banking sector and helped trigger the crisis.

A deal on curbing bankers' bonus is of particular interest to Merkel, who is seeking re-election in a vote on September 27, just after she returns from Pittsburgh.

European Union leaders agreed on Thursday to seek curbs on bankers' bonuses at the summit and said they wanted evidence the recession is over before they stop spending to prop up their economies.

EU Monetary Affairs chief Joaquin Almunia said it is likely the G20 will agree to set limits on bankers' bonuses.

"It is possible to fix limits, conditions...I think this is the most likely outcome of the G20 meeting next week," he told Spain's Cadena Ser radio.

Almunia also said a so-called "Tobin tax" on world financial transactions is an excellent idea but needs work before it could be put into practice.

Merkel said late on Thursday the possibility of a global tax on financial market deals had been discussed by EU leaders at a meeting in Brussels, adding that the idea was brought up by Germany and Austria with support from Britain and France.

German Finance Minister Peer Steinbrueck said on Friday he would press the G20 to examine the idea at the Pittsburgh summit but that he did not see a consensus on the issue.

The G20 leaders are also set to discuss how the world can stop the global imbalances that have plagued the world economy for so many years reappearing when recovery finally comes.

Policymakers are trying to work out where economic growth can come from if the U.S. consumer is no longer able to drive prosperity and are looking for ways to ensure surplus countries boost their own demand and deficit countries save more.

But they are also conscious that the crisis may have actually made it harder to persuade surplus countries not to build up large currency reserves to protect themselves against future credit crunches.

British Prime Minister Gordon Brown said the International Monetary Fund could help.

"The IMF and the World Bank must have the tools they need to help countries manage and insure themselves against the risk of future crises," Brown wrote in a letter to fellow EU leaders.

"This could involve improvements to IMF facilities to make them attractive to a wider range of countries, the development and integration of regional reserve pooling arrangements, and the use by the multilateral development banks of innovative new facilities, to provide protection against sudden stops in global capital flows," he added.

(Additional reporting by Noah Barkin in Berlin, by Sumeet Desai in London and by Robert Hetz in Madrid; Editing by Victoria Main)