U.S. sees G20 accord, Europeans demand tough rules

By Lesley Wroughton and Caren Bohan

LONDON (Reuters) - France and Germany joined forces on Wednesday to demand world leaders deliver on pledges of tough financial market regulation at a crisis summit, with French President Nicolas Sarkozy saying "this is not negotiable."

Keen to secure a confidence-boosting message for voters and frazzled financial markets as the world succumbs to the deepest downturn since the Great Depression, U.S. President Barack Obama said there were no substantive differences with Europe.

Washington wanted tougher regulation too, he told a news conference with Britain's Gordon Brown, summit host.

It was not clear whether the flashpoint, which appeared to focus primarily on Sarkozy's demands for blacklisting of tax havens, would be enough to sour the mood and compromise the outcome.

Several hundred demonstrators clashed with riot police and smashed bank windows in London's finance center ahead of the summit.

Police said one person died during the protest. More protests were planned for Thursday, the main day of a summit involving the world's biggest economies, developed and up-and-coming.

Global economic output will contract more in 2009 than any year since World War Two, says the International Monetary Fund, and IMF chief Dominique Strauss-Kahn says the "Great Recession" could cause 50 million job losses worldwide.

G20 leaders were preparing a major expansion in resources available through the IMF, possibly including a tripling of its war chest to $750 billion, G7 sources said.

Egypt's finance minister issued a stark warning -- people will die in the world's poorest countries if rich nations push them aside in the scramble to escape the global economic crisis.

Developed countries are borrowing heavily on international markets to fire up their economies, meaning poorer countries are increasingly unable to do so, said Youssef Boutros-Ghali, who heads the IMF's policy committee.

MOBILISING TRILLIONS

The G20 leaders hope around two trillion dollars governments are pumping into the economy in tax cuts, building projects and green investments will limit the depth and duration of recession and maybe create 20 million or so new jobs.

They were also looking to drum up more than $500 billion and maybe substantially more in funding the IMF can use to bail out economies which head into balance of payments troubles.

As the leaders dined with Queen Elizabeth at Buckingham Palace, officials were hammering away at details of what they would announce the following day.

Paris and Berlin fear the summit will fall short of the mark on regulation of tax havens, hedge funds and markets in general, and went in gunning for concrete announcements on that front.