World finance leaders gather in Washington today hoping to plot a course beyond the financial crisis, but Greece's worsening debt woes served as a stark reminder the global economy remains vulnerable.
The Group of 20 rich and emerging countries, whose crisis-forged unity helped to end the global recession, must find common ground on controversial matters including regulating banks, rebalancing global growth and giving fast-growing emerging economies more clout.
They were also likely to focus on Greece's debt crisis after the euro zone state asked to activate a rescue plan drawn up by the International Monetary Fund and the European Union.
The G20's united front may be fracturing, and International Monetary Fund chief Dominique Strauss-Kahn urged them to stick together on regulatory reform so policies mesh.
The sharpest divisions were over bank taxes, with Canada strongly opposed and Britain pushing for support. Finance ministers are expected to discuss two bank tax ideas proposed by the IMF. The Fund will present a report to G20 heads of state who are meeting in Toronto in June.
Shin Hyun Song, a senior economic adviser to South Korean president Lee Myung-bak, said bank levies would be the "big theme" of today's meeting.
The aim is to recoup the cost of bailouts so banks, not taxpayers, pick up the tab, but it is also a way to discourage banks from placing so many risky bets again.
"If we look at the bank levy idea more broadly as a means of changing behavior for the better, rather than just raising money, then it is much easier to sell this to other countries who didn't put any public money into the banking sector," he told Reuters.
He compared the bank levy to central London's congestion charge: "The primary purpose of that is to discourage people from taking their car into central London," he said.
US president Barack Obama yesterday chastised Wall Street for resisting an overhaul of US financial regulation, a priority for his administration.
In September, when G20 leaders met in Pittsburgh to draw up economic recovery plans, the mood had been somewhat more upbeat. Officials summed up their recession-fighting efforts with a two-word proclamation: It worked.
Economists widely agree that efforts to pump a combined $5 trillion in stimulus money into the economy and cut interest rates to the bone stopped the free-fall.
However, the rescue left most advanced economies shouldering debt burdens approaching World War Two highs, and Greece's fiscal troubles highlighted how risky that can be.
While Greece is not formally on the G20 agenda, it dominated a session of the smaller G7 last night.
Athens' problems are compounded by its unreliable data. The European Union's statistics office triggered a steep sell-off in markets yesterday by saying the Greek budget deficit was even greater than thought.
Greek prime minister George Papandreou today asked for the €45 billion package put together by the EU and IMF to be activated. The IMF said it would move quickly in response to the request by Greece without giving further details.
Reuters