* BRICS concerned over spillover effects of U.S. policy
* Emerging markets need to boost demand - U.S.
ST. PETERSBURG, Russia, Sept 5 (Reuters) - Emerging and
developed G20 powers struggled to find common ground on Thursday
over the turmoil unleashed by the prospect of the United States
reducing a flood of dollars to the world economy.
The Group of 20, which united in response to global crisis
in 2009, now faces a U.S. economy picking up, Europe lagging and
developing economies facing blowback from the looming 'taper' of
the Federal Reserve's monetary stimulus.
"Our main task is returning the global economy towards
steady and balanced growth. This task has unfortunately not been
resolved," Russian President Vladimir Putin told leaders as they
met at an annual summit in St. Petersburg.
Leaders signed off on a jobs and growth initiative, as well
as steps to combat international tax evasion and tighten
financial regulation. But concerns persisted that renewed market
turbulence could hit developing economies hardest.
"Systemic risks, the conditions for an acute crisis relapse,
persist," Putin said.
The summit was overshadowed by great-power tensions over the
Syria crisis, with leaders addressing security matters over
dinner after their traditional debate on a world economy that is
doing slightly better than a year ago.
Departing from his prepared remarks, Putin avoided
explicitly referring to risks arising from U.S. monetary policy.
But the message from the BRICS caucus of emerging markets, which
met earlier, was unmistakably aimed at Washington.
The BRICS announced they would commit $100 billion to a
currency reserve pool that could help defend against a balance
of payments crisis, although the mechanism will take some time
yet to set up.
"The eventual normalisation of monetary policies needs to be
effectively and carefully calibrated and clearly communicated,"
Brazil, Russia, India, China and South Africa said in a joint
That language reflected the text agreed by G20 finance
ministers in Moscow in July. Russian Deputy Finance Minister
Sergei Storchak said a passage on so-called "spillovers" would
be unchanged in the closing summit communique.
A Japanese government official said that at finance
ministers' talks over dinner, no countries were explicitly
critical of the Fed although it was discussed at length.
Even among emerging powers there were sharp messagems.
China and Russia said vulnerable countries, including G20
member India, will need to take steps to rebalance their
economies, ruling out bailouts for countries that have hit
Washington, while playing up its contribution to growth,
said emerging economies would have to do their homework as it
dials back its expansive policy settings.
"Emerging economies, increasingly ... will have to look
within their own borders for demand," Deputy National Security
Adviser Ben Rhodes said.
MIND THE SPILLOVERS
Fed Chairman Ben Bernanke triggered a selloff in emerging
market currencies, stocks and bonds and a flight to the dollar
when he raised the possibility in May of reducing the Federal
Reserve's $85 billion per month bond-buying programme.
A first step may follow this month - a move amply justified
by the state of U.S. recovery but with potentially huge
implications for a global financial system that has come to
depend on a cheap and abundant supply of dollars.
Advanced economies led by the United States will drive
global growth while emerging countries are at risk of slowing
due to tighter U.S. monetary policy, the International Monetary
Fund warned in a pre-summit briefing paper.
China, often reticent on the international stage, urged
Washington to be "mindful of the spillover effects and work to
contribute to the stability of the global financial markets and
the steady recovery of the global economy".
Deputy Finance Minister Zhu Guangyao pressed Europe to do
more to revive economic growth, which has started to pick up
after a sovereign debt crisis in the peripheral countries of the
"The structural problems are far from solved and now is no
time to be arrogant," Zhu told reporters.
Loose monetary policy must be adjusted step by step without
causing economic disruptions, German Chancellor Angela Merkel
said on the G20 sidelines, after the European Central Bank left
policy on hold on Thursday.
The high debt burden piled up by industrialised economies
has also driven calls from some members of the G20 - which
accounts for 90 percent of world output and two-thirds of its
population - to get borrowing down.
"A common understanding of the necessity to find an optimal
balance between fiscal consolidation and support of growth has
emerged in hot discussions," said Putin, hinting at
Ideas about binding commitments to extend the Toronto debt
reduction goals agreed at a summit hosted by Canada in 2010,
sought by Germany first and foremost, have been abandoned.
Canadian Prime Minister Stephen Harper, a champion of the
debt-reduction agenda, said he would nonetheless seek to balance
his budget by 2015 as he seeks to boost investment and growth.
Japanese Prime Minister Shinzo Abe told the G20 that Tokyo
aimed to achieve both economic growth and fiscal reforms with
his pro-growth policy agenda, but made no mention of a planned
doubling of the sales tax over the next two years.
Abe said Japan would pursue its aim of halving the budget
deficit - excluding new bond sales and debt-servicing - by the
fiscal year to March 2016 and achieving a surplus by March 2021.
"It is particularly important for Japan to achieve both
economic growth and fiscal consolidation as our country's fiscal
situation is more severe than other countries," Abe was quoted
by a Japanese official as saying.