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TOPWRAP 3-Obama demands G20 action; UK's Brown touts for support

Published 03/24/2009, 08:49 AM
Updated 03/24/2009, 08:56 AM
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* Obama calls for G20 to agree on more action

* UK's Brown on tour to drum up support, meets banks

* Euro zone activity edges up, UK inflation stubborn

* Europe stocks flat following U.S. toxic debt plan

(For more on the financial crisis click on)

By Madeline Chambers and Steve Slater

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

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 measures at the April 2 meeting in London to revive growth.

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

Economic 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 soon.

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.

In Britain, consumer price inflation rose unexpectedly to 3.2 percent year-on-year in February, defying expectations that deflation would take a grip.

But policymakers warned of a sharper economic contraction in the first quarter than the last three months of 2008, when the euro zone and Britain both shrank by 1.5 percent on the quarter.

Asked about the outlook in Europe and the United States, Bank of England Governor Mervyn King told a parliamentary committee: "In the short run it's not bright because the first quarter looks as if it could be even more of a downturn than the fourth quarter of last year."

In Prague, Chicago Federal Reserve President Charles Evans said the U.S. economy was set for a severe contraction in the first quarter but should start growing by the year-end.

BROWN MEETS BANKS, GOES ON TOUR

Britain's Brown starts a diplomatic offensive on Tuesday to win support for his plans to reverse world recession, before he hosts the G20 summit which investors are looking to for concrete policy plans.

He 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 summit would come out with a proposal to provide credit for international trade, according to an interview run in several newspapers on Tuesday.

"Relaunching commerce is essential in this phase. For all but particularly for developing countries," he was quoted as saying in Italy's Il Sole 24 Ore.

Before embarking on his travels, Brown met the chiefs of 13 major banks for talks about capital adequacy, regulatory reform and economic measures, after upbeat comments from Deutsche Bank and Credit Suisse.

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 Credit Suisse said 2009 had started well, matching recent guidance from Citigroup, HSBC and others, and that it would ask shareholders for the option to raise capital for acquisitions.

U.S., EUROPE AT ODDS

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 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.

He will hold a news conference later on Tuesday to explain his economic strategy to a recession-weary public.

Emphasising the trans-Atlantic gap, French Economy Minister Christine Lagarde emphasised the need 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.

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 stellar rally on Wall Street.

But European shares failed to follow suit, just edging higher after the euro zone and UK data pointed to mounting job losses and stubborn inflation.

Some analysts wondered whether the U.S. scheme would reach a critical mass and said Obama's administration would have no choice but to ask lawmakers for more money at a time when the U.S. public is growing increasingly wary of underwriting further bail-out efforts. (Writing by Mike Peacock; editing by Stephen Nisbet)

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