British Prime Minister Gordon Brown will hold talks in Downing Street today with US president Barack Obama on the eve of the crunch G20 summit to rescue the world economy.
Mr Obama landed at Stansted Airport in Essex last night, making Britain the first country outside North America he has visited as president.
He spoke to Mr Brown by phone from Air Force One to discuss the “outstanding remaining issues” which both sides acknowledge must be settled if agreement is to be reached by the leaders of the world’s biggest economies in London’s Docklands tomorrow.
Mr Brown will also hold talks at Number 10 today with Russian president Dmitry Medvedev, Indian prime minister Manmohan Singh, Chinese president Hu Jintao and Japanese prime minister Taro Aso as he seeks to finalise the details of a communique which has been the subject of intensive behind-the scenes negotiation over the last few weeks.
Over recent days, Downing Street has been playing down expectations of a conclusive anti-recession package emerging from the summit, though Mr Brown remains hopeful of agreement on a range of measures to restore growth and reform the international banking system.
He yesterday said that Thursday would see agreement on the world’s first international rules for the remuneration of bankers, to ensure that rewards are offered for long-term success not short-term risk-taking.
The G20 should take the “family values” of hard work and responsibility as a model for the financial markets, said Mr Brown.
The Prime Minister has set out five “tests” which the G20 must meet: providing resources for the IMF and World Bank to support struggling economies; cleaning up the banking system; doing “whatever is necessary” to restore growth; resisting protectionism; and delivering low-carbon growth.
But there is not expected to be agreement on the kind of co-ordinated “fiscal stimulus” sought by Mr Obama and Mr Brown.
European governments are holding firm against further stimulus, arguing that they have already poured €400bn – soon to rise to €500bn – into tax cuts and spending programmes in response to the recession. Europe’s more generous welfare systems automatically force EU state spending up during a downturn to a greater extent than in the US, they point out.
France’s President Nicolas Sarkozy and German chancellor Angela Merkel are instead putting emphasis on a tougher system of international financial regulation to replace the light-touch “Anglo-Saxon” model which has dominated recent decades.
French finance minister Christine Lagarde hinted that Mr Sarkozy may walk away from the summit if his preference for a global financial regulator is rejected, telling the BBC he would not sign any agreement if he felt “the deliverables are not there”.
And her German counterpart Peer Steinbrueck said last night he would be “very reluctant and hesitating” to sign up to any deal which committed Berlin to further fiscal stimulus.
“We must be very much aware of what it means for our public debt and as burdens for upcoming generations,” he told BBC2’s 'Newsnight'.
Mr Steinbrueck played down the prospect of walkouts, insisting there was “a high probability that we will succeed in implementing better regulation and better supervision and make further achievements in overwhelming this financial turmoil”.
The most important principle for Germany was that there should be “no blind spots” leaving financial players, markets or products unsupervised and unregulated, he said.
“A lot of people, particularly the Anglo-Saxons, were very much in favour of deregulation,” said Mr Steinbrueck. “I think this deregulation and very cheap money is responsible for what we are facing now.”
The arrival of a virtually unprecedented number of world leaders in London has necessitated a massive security operation, with thousands of demonstrators expected to take to the streets of the capital over the next two days.
Following his talks with Mr Brown, President Obama will have an audience with the Queen at Buckingham Palace and will meet Conservative leader David Cameron.
All the world leaders will go to the Palace for a reception hosted by the Queen and the Duke of Edinburgh tonight, then go on to Downing Street for dinner held by Mr Brown and his wife Sarah.
Earlier in the day, Mrs Brown will meet Mr Obama’s wife Michelle and host the spouses of the other leaders.