(Adds Canadian comment)
By Alister Bull
PITTSBURGH, Sept 24 (Reuters) - Italy pushed back quickly on Thursday against a British bid to promote the Group of 20 into the steering committee for the global economy, exposing the concern of some European countries that this would be at their expense.
Italian Prime Minister Silvio Berlusconi, currently chairman of the Group of Eight richest nations, urged the two forums be kept separate and made a coded call to maintain the dominance of the smaller group.
"We stress that it is essential that there should be the closest coordination between the G8 and G20 presidencies, and that the differences between the two are clear," Berlusconi wrote in a letter to the G20 summit host, U.S. President Barack Obama.
The financial crisis that ripped into the U.S. economy last year and quickly spread worldwide has elevated the status of the G20, which groups the old industrialized powers of the Group of Seven with emerging economies that proved more resilient in the downturn.
The G20 leaders are meeting on Thursday and Friday in Pittsburgh, their third gathering since the collapse of investment bank Lehman Brothers sent shock waves through the world financial system one year ago.
Berlusconi's letter was made public soon after British Prime Minister Gordon Brown said leaders would institutionalize the G20 as the key economic steering committee.
"What we are trying to do is to create a new system of international economic cooperation around the world," Brown told reporters in New York, where he was attending the United Nations General Assembly before flying to Pittsburgh.
"It's never really happened before. We've had the G8, we've had all these organizations. We've got this one chance to make a huge success of international economic cooperation," he said.
An early U.S. proposal for the summit this week would have the G20 seek regular assessments from the International Monetary Fund on the progress of its members toward a more balanced world economy.
The G20 was formed in 1999 for finance ministers and central bank chiefs following the Asian financial crisis. The idea was to help the G7 -- the United States, Japan, Germany, Britain, France, Italy and Canada -- talk with the wider world.
The G8 is the G7 plus Russia. It meets at the level of leaders but has been forced since the latest crisis to share the world stage with the G20.
STATUS QUO
Economists said the reluctance of some European nations to permanently promote the G20 was entirely predictable.
"Some of the members of the smaller group are happy with the status quo," said David Shorr from The Stanley Foundation, a foreign policy think-tank based in Muscatine, Iowa.
"A number of governments at the European level are sensitive about whether they are going to come out with the same or diminished influence," he said.
The head of the European Commission, Jose Manuel Barroso, also signaled that the European Union's executive body was not comfortable with an expanded role for the G20, if that crowded out the IMF or World Bank.
"We (Europe) support the G20 process. So we very much support increased global governance and the G20 is a very important forum we should reinforce," he told Reuters in an interview on Wednesday.
"But that reinforcement should not be done at the cost of existing institutions that have specific, well-established mandates like the IMF, or even the World Bank. We cannot dilute the IMF's position."
Britain and France, whose former finance minister Dominique Strauss-Kahn now heads the IMF, have suggested replacing the IMF's 24-member policy-setting International Monetary and Finance Committee with a G20-like ministerial council.
The EU collectively wields substantial clout on the IMFC due to voting rights bequeathed at the IMF's creation after World War Two, when the balance of world economic power looked very different from today.
But the proposal has drawn opposition from newly powerful emerging economies led by China, India, Russia and Brazil, which suspect the reform would weaken their push for increased voting powers at the IMF. The topic will be discussed at the G20.
Canada -- which like Italy is one of the second-tier G8 members -- is also likely to be concerned that its voice could be drowned out if the G20 becomes the world's most important economic grouping.
Canada hosts the G8 in 2010 and a senior Canadian official tersely reminded reporters of this fact when asked during a briefing if the forum would be replaced by the G20.
But if some European countries feel that this is mainly aimed at them, they may be right.
"In some sense, the reason one has the G20 is to try to dilute Europe a bit," said Edward Truman, a former senior U.S. Treasury official who was part of the team that helped form the G20 back in 1999.
"The G7 are a bunch of broadly like-minded countries ... but the real issue there is Europe, and the notion that G7 ... has four members from the EU is a problem," said Truman, who is now a senior fellow at the Peterson Institute for International Economics in Washington. (Additional reporting by Sumeet Desai, Darren Ennis in New York and David Ljunggren in Pittsburgh; Editing by Frances Kerry and Leslie Adler)