By David Lawder
Spreading fears about a Greek debt default and contagion to larger economies in the euro zone have raised alarm in the United States and among emerging market heavyweights about the risk of a potentially major shock to an ailing global economy.
At talks among the Group of 2O major economies and at the International Monetary Fund this week, the United States and the BRICS emerging economies are likely to join the IMF in calling for more decisive action from Europe.
But with U.S. political leaders divided on how to fix their own economic problems and no sign of consensus among the big BRICS emerging economies on how to help, the chances of a new approach to righting the global economy look slim.
"The G20, all it can do is to provide some peer pressure on the Europeans, to sensitize the Europeans to the huge scope for spillover that the euro crisis is already having," said Domenico Lombardi, a former IMF official and a senior fellow at the Brookings Institution in Washington.
"We should not expect any type of international response along the lines we saw at the height of the financial crisis," he said.
The G20 agenda is largely devoted to development issues, with just a dinner on Thursday for finance ministers and central bank governors to discuss threats to the global economy.
The only G20 statement is expected to come on Friday after a meeting of finance and development ministers on climate change, sustainable agriculture and infrastructure financing in developing economies.
"It would be unjust to say that the G20 did not reach agreement on the euro zone crisis at this meeting, because that is not the point," said a source from G20 host France.
Meetings of finance ministers from the Group of Seven advanced economies and the European Union in the past two weeks failed to break new ground in the euro crisis, setting up the Washington meetings as potentially another missed opportunity.
EMERGING MARKET PRESSURE
With Italy slapped with a debt downgrade on Monday and the IMF warning that Europe and the United States could slip back into recession, concerns over the immediate outlook for the global economy are likely to take precedence over longer-term goals on reducing trade imbalances.
The IMF on Tuesday warned Europe it needed to move fast.
"There is a wide perception that policymakers are one step behind markets," IMF chief economist Olivier Blanchard told reporters. "Europe must get its act together," he added.
Some investors are anxious to see signs of fresh action by policymakers. "I think it's going to necessitate some sort of action by the G20 this weekend," said Kathy Lien, director of currency research at GFT, shortly after Italy's downgrade.
The so called BRICS group -- Brazil, Russia, India, China and South Africa -- will meet separately on Thursday to discuss possible options to limit fallout from the euro-zone crisis.
U.S. Treasury Secretary Timothy Geithner has long urged China and other big emerging countries to boost domestic demand and let their currencies rise in order to take up some of the slack in the global economy.
Brazil is expected to propose that it and other big emerging economies make new funds available to the IMF as a way to improve its firepower in its efforts to ease the euro zone crisis.
But analysts expect little agreement among the emerging heavyweights. Instead, they are expected to put pressure on advanced economies to resolve the political acrimony that is keeping them from taking bold action.
"The BRICS in particular are likely to make a strong statement about how Europe needs to resolve its crisis soon because they fear the negative effects of more troubles from Europe," said Eswar Prasad, a former IMF official who is a professor at Cornell University.
"I suspect they are unwilling to put up any serious money for this," he said.
EUROPE FOCUSES ON FISCAL CONSOLIDATION
Geithner met with a cool reception at a meeting of EU finance ministers last week when, according to participants, he urged wealthier states -- in particular Germany -- to do more to support growth and suggested options to leverage euro-zone bailout funds to give them more clout.
European ministers pushed back, saying that fiscal consolidation remained their top priority. German officials on Tuesday said they will stick to their austerity guns, and stress the need to cut budget deficits.
The EU intends to shift the spotlight elsewhere. It will call on China to boost domestic demand and the United States and Japan to tackle their public deficits, according to a document obtained by Reuters.
This would help rebalance global growth, the EU said -- a key agenda item for the G20 since it emerged as the premier economic policy forum during the 2007-2009 financial crisis.
(Additional reporting by Jan Strupczewski in Brussels, Daniel Flynn in Paris and Brian Winter in Sao Paulo, Editing by Chizu Nomiyama)