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TOPWRAP 2-Obama demands G20 action; UK's Brown drums up support

Published 03/24/2009, 05:36 AM
Updated 03/24/2009, 05:48 AM
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* Obama calls for G20 to agree on more action

* UK's Brown on tour to drum up support

* Euro zone service sector shows glimmer of life

* Deutsche Bank, Credit Suisse more upbeat

* Stocks climb following U.S. toxic debt plan (For more on the financial crisis click on)

By Madeline Chambers

BERLIN, March 24 (Reuters) - U.S. President Barack Obama urged fellow leaders on Tuesday to agree swift action at a G20 summit next week to spur global recovery and Britain's Gordon Brown embarked on a tour to seek international accord.

A day after Washington unveiled a plan to soak up toxic assets plaguing credit markets, Obama called in an article for German newspaper Die Welt for agreement on stimulus measures at the April 2 meeting in London which he said could revive growth.

"First, we must take quick measures to stimulate growth," Obama wrote, according to the translation of his comments.

Britain's Brown starts a diplomatic offensive on Tuesday to win support for his plans to reverse world recession, before the summit which investors are looking to for concrete policy plans.

The British prime minister will give a speech at the European Parliament in Strasbourg before flying to New York for a meeting with U.N. Secretary-General Ban Ki-moon and then to Latin America for talks in Brazil and Chile.

Brown said the upcoming G20 summit would come out with a proposal to provide credit for international trade, according to an interview published in several newspapers on Tuesday.

"The G20 will come out with a concrete proposal to reopen credit lines to support import/export operations," he was quoted as saying in Italy's Il Sole 24 Ore.

"Relaunching commerce is essential in this phase. For all but particularly for developing countries," he said.

The United States and Europe have been at odds over whether more spending was needed on top of what governments have already adopted to pull their economies out of recession, with many Europeans arguing the stress should now shift to strengthening market regulation.

Obama said it was too early to close the fiscal taps. "If the London summit contributes towards immediately initiating joint measures, we can smooth the path for a secure recovery and prevent future crises," he wrote.

Emphasising the trans-Atlantic gap, French Economy Minister Christine Lagarde called for more coordinated regulation.

"(We need) coordination at all levels, no loopholes, no black holes," she told a financial conference in Prague in a taped video message.

GLIMMERS FROM DATA, BANKS

Latest data suggested some loosening of the stranglehold the worst financial crisis since the 1930s has exerted on the world economy. But few experts forecast an upturn before 2010.

Markit's Flash Eurozone Purchasing Managers Index for the euro zone's dominant service sector rose to 40.1 in March, still well below the 50 mark where growth begins but above February's 39.2 and considerably above expectations.

"It could have been worse ... but the levels overall are fairly depressed," said Rainer Guntermann, economist at Dresdner Kleinwort. "It's not clear that this is the turning point. Domestic demand is likely to deteriorate further going forward."

There were some positive noises from banks, whose reluctance to lend following the meltdown of the risky end of the U.S. housing market has been at the heart of the crisis.

Deutsche Bank will return to profit this year if the global economy, financial markets and regulatory environment develop as expected, its chief executive said.

Switzerland's second-largest bank Credit Suisse said 2009 had started well and that it would ask shareholders for the option to raise capital for acquisitions.

U.S. PLAN

U.S. Treasury Secretary Timothy Geithner on Monday detailed a raft of incentives for private investors to buy up to as much as $1 trillion of troubled assets that have strangled global debt markets and pushed the world economy into recession.

Relief that the details of a long-awaited scheme were finally out and hopes it will attract enough buyers to unclog credit markets spurred a stock market rally and lured investors back to riskier assets such as high-yielding currencies.

Wall Street rocketed in response. Asian stocks climbed 2 percent to a two-month high while European shares were up a more modest 0.3 percent.

But analysts poring over the plan's details wondered whether the scheme would reach a critical mass.

Some economists said Obama's administration will have no choice but to ask lawmakers for more money to extend the scheme at a time when the U.S. public is growing increasingly wary of underwriting further bail-out efforts.

"I'm afraid that the economy will continue to slide down well into next year," Martin Feldstein, a Harvard University professor and former head of the National Bureau of Economic Research, told Reuters in an interview in Beijing.

Obama signed into law last month a $787 billion fiscal stimulus plan and Feldstein said it may take another package of similar size or even bigger to spur growth. (Writing by Mike Peacock; editing by Stephen Nisbet)

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