G20 pledges make hard work for finance ministers

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn (R), Mexico's Finance Minister Augustin Carstens (C) and World Bank President Robert Zoellick hold a closing news conference of the spring IMF-World Bank meeting at the IMF headquarters in Washington April 26, 2009.

WASHINGTON (Reuters) - Delivering on G20 leaders' promises of money and more to combat global recession is a hard slog, and this weekend's gatherings of finance ministers in Washington showed just how hard.

One of the clearest illustrations is that IMF boss Dominique Strauss-Kahn admits he is working the telephones hard to secure $500 billion leaders promised the International Monetary Fund with great fanfare at a summit in London three weeks ago.

He is confident the money will come in the end but the count is still $100 billion or more short of the sum that looked like a done deal three weeks earlier at the summit.

Nothing new was agreed in Washington at meetings which began with the G7 club of industrialized economies and widened to the G20 club of industrial and developing economies on Friday, ahead of International Monetary Fund meetings on Saturday and Sunday.

That was no surprise in itself, argued ECB chief Jean-Claude Trichet, because the major collective decisions on responses to the economic crisis were taken in London on April 2. The job now, he says, is to follow through, which is critical if less glamorous.

Few would disagree.

Marco Annunziata, London-based chief economist at UniCredit bank, nonetheless asks whether the G7 and G20 groups should bother meeting just three weeks after the G20 summit.

"It made obvious that we are still searching for the additional IMF funds and gave us the embarrassing acknowledgement that toxic assets should be a priority, but no hint of a coordinated action on them," he said.

IT'S THE BANKS STUPID

The shortfall in the funds the IMF was promised to enable it to rescue emerging economies destabilized by the downturn was not the only shortcoming exposed in Washington, he says.

Everyone agrees governments must imperatively deal with the toxic assets of major banks but the meeting merely served to highlight how slow they are in doing so.

Indeed, Canadian Finance Minister Jim Flaherty, who attended the meetings, said as much himself.

"It is frustrating," said Flaherty, who hopes U.S. Treasury Secretary Timothy Geithner's decision to conduct stress tests on most of the large U.S. banks will lead quickly to an effective plan to treat the problem.

"Once the Americans do their cleansing of their system and reinforcement of their system, we need it done also in Europe," he said.

On that point, the IMF's latest analysis of the scale of that problem did little to advance things.

In its Global Financial Stability Report, the IMF estimated that European banks would need to write down $750 billion through 2010 in bad loans and securities.

Trichet said the IMF's analysis was not entirely convincing and France said it was flawed because it was based on "top-down" extrapolation rather than the kind of hard data that national supervisory bodies have on their banks.

Either way, the clean-up of toxic assets it is still a job waiting to be done.

When it comes to relatively smaller commitments made at the G20 summit, the follow-up task is hard going too.

IMF chief Strauss-Kahn had a hard time explaining to Irish aid campaigner Bob Geldof how technically complicated it is to deliver fast on a pledge of $6 billion in low-cost loans for Africa.

He says he will get there but needs a few weeks more to sort out numerous technical difficulties that arise when the IMF has to sell some of its gold, which is part of the plan to finance the cut-price loans.

Geldof says the intricacies of IMF rules should not get in the way in exceptional times.

Those are some of the short-term commitments made by G20 leaders. But longer-term ones will be a headache too, notably the promised reshuffle of IMF voting rights to give emerging market economies more say in global economic governance.

That is essentially regarded as a zero-sum game but those who might see their clout diminished to give others more are not crying surrender just yet.

Swiss President Hans-Rudolf Merz told a news conference that his country would be contributing $10 billion to the IMF's warchest for economic emergencies and did not intend to sacrifice its seat on the IMF's policy-making IMFC council in a power reshuffle which G20 leaders agreed to advance to 2011 from 2013.

He even said he had some doubts about bringing the date of the reshuffle forward to as early as next year.

(Editing by Chizu Nomiyama)