World looks for new leaders as crisis outgrows G7

By Emily Kaiser - Analysis

WASHINGTON (Reuters) - The credit crisis has left the Group of Seven club of rich nations looking like a 20th century relic unable to tackle a modern financial disaster, and its larger siblings may be no better suited for the task.

Over the past 48 hours, world finance leaders have gathered under the umbrellas of the exclusive G7, the broader G20 that includes both emerging and developed economies, and the 185-nation International Monetary Fund.

None of them managed to plot a course out of the credit morass wide enough to address the full range of financial problems yet focused enough to calm investors who are desperately looking for answers to the 14-month crisis.

"If you look at the global financial architecture, I don't think it reflects the global economy today," U.S. Treasury Secretary Henry Paulson said when asked whether the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- should be expanded to include developing powers such as China, India, Russia and Mexico.

"It's a big world, and it's a lot bigger than the G7."

The credit crisis has hammered that point home in the past three weeks as no region has escaped the panic-driven stock market slides which have become a near-daily occurrence.

Many analysts were bracing for another rocky trading day on Monday after a weekend full of meetings in Washington and Paris failed to fully allay concerns the global economy was dangerously off course.

"If you ask me for my view about the problems we're seeing right now, it's the absence of strong, visible leadership capable of driving change and coordinated responses to market burn-down," Trevor Manuel, South Africa's finance minister, said during a panel discussion on Sunday.

He faulted the IMF for seeming "remote" during the crisis.

At its session on Friday, the G7 scrapped the usual three-page communique that normally covers everything from the economic outlook to money laundering and instead offered a bullet point five-step plan that focused on the need to unfreeze markets and rebuild bank balance sheets.

"The G7 statement was underwhelming. Much briefer than most of us had expected," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York.

"This was a great opportunity for them to try to come up with concrete measures to help the credit markets. They were all there locked up in the same room in Washington and with G20 ministers at hand. Still, they missed it."

On Sunday, European heads of state held a hastily arranged summit in Paris and agreed to pump money into banks, but the specific steps to be taken would be left to each government to decide.

"Even though these measures are not as strong as people expected, and the G7 statement was actually pretty tame, it seems central banks and the finance leaders are finally beginning to move in a coordinated manner," said Kathy Lien, head of currency research at GFT Forex in New York.

CALLING THE "GX"