German finance minister Peer Steinbrück has admitted at a meeting with his G8 colleagues in Potsdam that his hopes of agreeing tighter regulations for hedge funds are looking doubtful in the near future, writes Derek Scally in Berlin.

Berlin's call for greater regulation earlier this year prompted widespread criticism from the financial sector as well as from Britain and the US and the idea has been abandoned. Instead, German officials now stress the importance of the wider discussion of hedge fund stability during Germany's G8 presidency this year, and have pinned their hopes on a self-regulating code of conduct to be adopted next year.

"The discussions we triggered in February were worth it," said Mr Steinbrück, saying he was not interested in regulation but "avoiding systemic risks for the world's financial markets".

"Nobody believes that regulation can be achieved from the side of the state or from a supranational level.

"What we are interested in is an indirect approach. . . I don't care about whether it will come to an implementation of hedge fund monitoring or a specific code of conduct by the end of this year or in 2008, as long as we get there."

The German finance ministerMr Steinbrück said he would continue to discuss the matter with his colleagues at a two-day meeting at which there were several notable absences.

US treasury secretary Henry Paulson will not attend, British chancellor Gordon Brown will only be at some of the sessions and French finance minister Jean-Louis Borloo has just been appointed.

Berlin has also put on the agenda a new Africa action plan to combat poverty and promote long-term, sustainable growth and development. It presented a paper recommending partnership programmes between African countries and G8 members to improve administrative and financial transparency in African countries with the aim of encouraging foreign investment.