* "Difficult talks" on economy at G20
* Emerging market turmoil a focus
* Communique reflects improvement in developed world
* Federal Reserve policy shift looms large
By Lidia Kelly and Luke Baker
ST. PETERSBURG, Russia, Sept 6 (Reuters) - The Group of 20 powers said on Friday the world economy was improving but it was too early to declare an end to crisis with emerging markets facing increasing volatility.
The prospect that the Federal Reserve may rein in its expansive monetary policies as soon as this month has plunged into turmoil some emerging economies that had enjoyed rapid growth helped by a flood of cheap dollars.
In talks on the economy which were overshadowed by the Syrian crisis and which were described as "difficult" by participants, emerging and developed powers in St. Petersburg managed to find a common form of words.
Leaders of the G20 - which accounts for 90 percent of the world economy and two-thirds of its population - agreed to adjust policy carefully but said countries at the sharp end also had to put their houses in order.
A communique issued at the end of the two-day summit stuck closely to the statement issued by finance ministers in July, demanding changes to monetary policy must be "carefully calibrated and clearly communicated".
International Monetary Fund Christine Lagarde welcomed that commitment, adding: "Both advanced economies and emerging markets will have to address their domestic challenges in order for spillovers to be effectively managed."
The G20, which united in response to global crisis in 2009, now faces a multi-speed recovery with the U.S. economy pushing ahead, Europe maybe finding a floor and developing economies facing blowback from the looming 'taper' by the Fed.
The nod in the communique to managing "spillovers" of policy shifts was the closest countries like India got to an acknowledgement of their plight.
"The situation in the global economy looks better now than it did five years ago. Economic growth is recovering, but risks of course are still very, very great," Russian President Vladimir Putin told a news conference.
As the statement was released, markets were fixated on the monthly U.S. jobs report which came in weaker than expected, complicating the Fed's decision on whether to scale back its massive monetary stimulus later this month.
Demands led by Germany for binding targets to extend the Toronto debt reduction goals agreed at a summit hosted by Canada in 2010, fell on deaf ears as the focus has shifted firmly towards promoting growth.
"Medium-term fiscal strategies ... will be implemented flexibly to take into account near-term economic conditions, so as to support economic growth and job creation, while putting debt as a share of GDP on a sustainable path," the communique said.
New elements referred to a growth initiative proposed by Australia, which assumes the G20 chair next year, a proposal to tighten regulation of so-called 'shadow banking' and extending a deadline on reining in trade protectionism.
The summit debate on the health of the world economy, chaired by Putin on Thursday evening, was difficult and reflected concerns about a growth slowdown in the developing world.
"The most difficult and time-consuming discussions related to the evaluation of the situation of global economy," Andrei Bokarev, head of the Finance Ministry's international department who was involved in drafting the communique, told Reuters.
The BRICS group of large emerging economies - Brazil, Russia, India, China and South Africa - agreed to chip $100 billion into a currency reserve pool that could help counter a possible balance-of-payments crisis.
But the facility is a drop in the ocean compared to the trillions traded in foreign exchange daily and it is likely to be next year at the earliest before it is finalised.
Even within the BRICS there was an acknowledgement that countries had to help themselves.
China and Russia - which both run external surpluses - chided India for failing to tackle a yawning current account deficit that has exposed the rupee to a brutal selloff amid a broader flight to the U.S. dollar.
"Facing increased financial volatility, emerging markets agree to take the necessary actions to support growth and maintain stability, including efforts to improve fundamentals, increase resilience to external shocks and strengthen financial systems," the G20 communique said.
Indian Prime Minister Manmohan Singh won some support from Japan, as the two countries said they would expand a bilateral currency swap facility to $50 billion from $15 billion, strengthening the rupee's defences.
Nascent signs of a turnaround in Europe after a sovereign debt crisis and slump in parts of the euro zone kept the region's leaders out of the firing line for the first time in three years.
"I want to tell you, at this G20 we were no longer the focus of attention," said European Commission President Jose Manuel Barroso.