WASHINGTON, April 23 (Reuters) - Finance ministers from the world's large industrial and developing economies meet here on Friday to follow up on pledges of money and reform to fight the worst financial crisis since the 1930s and prevent a repeat.
Can they say or do anything new about the crisis just three weeks after the leaders of Group of 20 nations held a crisis summit in London? The short answer is not a lot. Their job is to try to ensure that what leaders promised gets done, and it is no easy task.
Here is a rundown of the main issues and likely outcome of the Washington talks -- first among ministers and central bankers from the G7 group of industrialized powers and then the G20 forum where they team up with large developing powers.
The G7 and G20 meetings take place before weekend meetings of the International Monetary Fund and World Bank.
BANKS:
Focus very much on what the United States in particular will do next to stabilize its banks. Everyone would like to be a fly on the wall when Treasury Secretary Tim Geithner briefs ministers on stress tests U.S. regulators have been conducting to assess which large U.S. banks are most vulnerable.
Expect: Perhaps more noise than light. Regulators are due to publicly reveal details of methods used in conducting the stress tests of 19 largest U.S. banks on Friday, but the test results themselves will not be made public until May 4.
Otherwise expect: Discussion of IMF estimates that total losses in financial sector could be $4.1 trillion and notably that continental European banks may need more new capital than U.S. banks, despite smaller potential losses. The French are skeptical of the IMF's estimates, which are 'top down' rather than 'bottom up' by regulators with information from the banks themselves, information that the IMF does not have.
ECONOMIC OUTLOOK:
Expect: A tiny dose of hope and large dose of grim realism. G7 communique (the G20 is not expected to issue one) to restate extent of the world economy's woes, but also possibly note some recent high-frequency indicators suggesting the pace of plunge is slowing, perhaps offering hope of stabilization. The IMF this week forecast a global economic contraction of 1.3 percent for 2009, a projection that is hard to ignore.
IMF FUNDS:
Expect: Perhaps but not definitely, greater clarity on who will pay exactly how much toward the grand total of $500 billion in extra emergency loan funds that G20 leaders announced. No obligation to conclude at these meetings though.
What we know: Some $300-billion-plus is accounted for. Japan, U.S., EU each pledged $100 billion. China is said to be ready to offer $40 billion but has not itself confirmed, and other smaller sums are being pledges by the likes of Norway and Canada.
What we don't know: Where the other near-$200 billion will come from. Whether EU governments will respond positively to a French proposal that they go further than $100 billion and suggestion that this means going as high as $160 billion.
FOREIGN EXCHANGE:
Expect: Broadly same wording as February Rome G7 communique [ID:nLE699147], and perhaps a reference to need to avoid competitive currency devaluations as a response to the crisis. The latter was referred to in G20 communiques and officials say it is not clear whether there is a perceived need to repeat it in the G7 communique.
What we know: What was said in Rome G7 communique is:
"In particular, we welcome China's fiscal measures and continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi in effective terms and help promote more balanced growth in China and in the world economy.
"We reaffirm our shared interest in a strong and stable international financial system. Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange markets closely, and cooperate as appropriate."
STIMULUS:
Expect: Not much more than reaffirmation of need to ensure maximum fiscal stimulus is used effectively to limit scale of downturn. IMF update possible on commitments so far. United States and IMF have been urging a sustained effort to lift economies.
What we know: G20 summit communique on April 2 said stimulus measures were worth $4 trillion at this stage. Officials say that is the total of what would go into the economy this year and next if governments deliver all they have announced in terms of total fiscal expansion.
REGULATION:
Expect: Some news from IMF's Dominique Strauss-Kahn and/or Mario Draghi, the head of the Financial Stability Board, on how the IMF and FSB will work together to provide a more effective "early warning" system on financial crisis. The IMF and FSB are due to present findings from pilot tests of system this weekend. [ID:nN22613558]
Expect: Comments from some delegations on potential problems with execution of G20 pledges to regulate hedge funds. G20 leaders said all hedge funds of systemic importance would have to be be regulated but the French and possibly others are worried that most hedge funds will continue to escape this if bar is set too high on what constitutes a fund of systemic importance.
Expect: Some further but inconclusive comment on campaign to get offshore financial centers and tax havens to meet OECD-set standards of bank information exchange and disclosure.
G7 vs G20:
Twice-yearly IMF meetings are always preceded by a meeting of G7 finance ministers and central bankers and U.S. hosts decided to tag a brief meeting of officials from the wider G20 on Friday to the back of the G7 gathering, followed by a G20 dinner. G20 considered as a more politically expedient forum now since it represents more than 80 percent of world GDP and trade.
What we know: Some G7 countries, Japan and Canada in particular, are keen to keep G7 forum running, partly out of feeling that it remains hard to take decisions at G20 level.
What we don't know: Extent to which governments will keep the G7 forum meeting as regularly as it used to if the G20 or other wider groupings are considered essential in terms of the legitimacy and breadth of inclusion needed. (compiled by Brian Love)