Small steps should pave way to UK's grand G20 plan

By Jodie Ginsberg - Analysis

LONDON (Reuters) - Britain should shelve ambitions to remake the world's financial structures as chair of the G20 next year and focus first on curbing protectionism, currency volatility and what should follow a volley of stimulus measures.

Prime Minister Gordon Brown's office says the G20 summit he will host in April -- the first such international event U.S. President Barack Obama is expected to attend -- will assess pledges to assist the world economy made at a summit in Washington last month.

"The UK will use the meeting in London in April to review progress of the Action Plan for strengthening financial regulation ... and to set out a clear process for reform of the international financial institutions to make them fit for an age of global capital," his office said.

But analysts say Brown, who has led calls for such reform, should instead push for global action on protectionism, currencies and regulation from the group of nations that aspires to global economic leadership but whose track record is so far muted.

Britain should focus first on small but decisive steps in some key areas if it ever wants to achieve its grander aim of overhauling the world's financial systems.

"I think Britain should forget any grand plans for a Bretton Woods II type initiative since neither the Chinese nor the Americans have any appetite for it," said Holger Schmieding, an economist at Bank of America.

"A more pedestrian approach focused on improving regulation and financial supervision would yield better results."

CHEQUERED START

The results of what was promised at the November summit in Washington have been mixed.

A hoped-for breakthrough in world trade talks by year-end never materialized and a pledge not to raise trade barriers for 12 months is already under pressure.

Since the November 15 meeting, Russia has announced plans to hike duty on imported cars, India has raised import tariffs on steel and the European Union has imposed anti-dumping duties on certain Chinese products.

On its more vague promise to tackle the global economic downturn, more progress has been made. Most countries have taken steps to stimulate their economies although even there tensions emerged over what kind of packages will work best.

Germany's finance minister, who said countries were rushing through "crass" and untested rescue plans at a "breathtaking and depressing" pace, upset the UK when he explicitly criticized Britain's massive borrowing plans.

Obama has said that signing a major economic stimulus package will be his first priority when he takes office on January 20, which government sources say could range from around $675 billion to $775 billion in government spending over two years.

Simon Johnson, Professor of Entrepreneurship at MIT and a former IMF chief economist, says there are three things the G20 -- a group of finance ministers and central bank governors from most of the world's 25 largest national economies -- needs to do under Britain's chairmanship.