World leaders may agree on economic plan and pledge action plan

A senior Indian official told reporters that the leaders may agree to coordinated moves to boost spending to spur global growth. "I am reasonably hopeful that the communiqu? the leaders will issue will send a signal which will be substantive in this exceptionally difficult situation," Montek Singh Ahluwalia, deputy chairman of India's Planning Commission.The summit, billed as a first in a series, comes amid growing evidence that the worst international financial crisis in generations is taking a heavy toll on economies around the world with EU data on Friday showing the 15-nation eurozone officially in recession.He indicated that the leaders of the Group of 20 countries meeting in Washington could endorse a "coordinated signal for a fiscal stimulus.""I wouldn't dismiss that signal -- these are sovereign authorities and there has to be some presumption that if they agreed, they will do something," Aluwalia said."I am not unhopeful that there will be that message -- which is very important," he said.While the crisis began in the US housing market, it has triggered plunges in global stock markets and mass lay-offs as the financial sector struggles to stay afloat, swamped with subprime mortgages turned sour.He piled on the pressure for developed countries to inject large amounts of government money into their economies. "If we are facing the most serious crisis in the world economy since the Great Depression then we need to take a lot of possibly unorthodox and special steps," he said.PROSPECTS LOOK DIM

Created in 1999, the Group of 20 (G20) countries account for 85 percent of the world economy and about two-thirds of its population.

Its members are the United States, Germany, Japan, France, Italy, Britain and Canada, the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. Spain and the Netherlands have also been invited.China and Germany have recently committed to stimulus packages to reignite growth following a US-triggered financial crisis that threatens to plunge the world economy into a recession.But prospects for joint action on growth, let alone a major overhaul of the world financial system, looked slim with host President George W. Bush resisting bold moves before leaving office in two months and President-elect Barack Obama absent.Europeans said a broad framework for reforms with a timeline for further action will be released when the summit wraps up on Saturday."We share a determination to fix the problems that led to this turmoil," Bush said at a White House dinner for leaders of the Group of 20 advanced and developing economies.EMERGING MARKETS WARN

Emerging market countries warned time is running out to stem the economic damage from credit market turmoil that began about 17 months ago.

"If we don't take quick action we run the risk of falling into a depression," said Brazilian Finance Minister Guido Mantega, adding both regulatory reform and concerted government spending were needed.The euro zone, the world's second largest economic block, tumbled into recession in the third quarter. The United States and the United Kingdom are fast headed there, which would risk pulling the world into its deepest slump in many decades.Asian economies heavily dependent on exports to the West are particularly vulnerable. China, South Korea and Japan said at the summit they were considering steps including currency swaps, which would strengthen their regional defenses against the global financial upheaval.ROLE OF CAPITALISM

European leaders have said the deepening financial crisis shows why stricter market rules are needed to rein in free-wheeling capitalism.

German Chancellor Angela Merkel said as she left Berlin a clearer framework is needed to prevent future problems. Her finance minister, Peer Steinbrueck, said the window of opportunity for financial reform had never been so wide open.

British Prime Minister Gordon Brown is even more ambitious. He is calling for redesigning the 60-year-old world financial order, called Bretton Woods, to meet the demands of a global economy where capital moves at lightening speed across borders.

But the United States and Canada only want moderate reforms, and have ruled out a major financial overhaul.

Bush, trying to counter criticism that U.S-style capitalism is to blame for the crisis, said in a toast that "free market principles offer the surest path to lasting prosperity." He has urged leaders to work to fix the system, not dismantle it.

Despite underlying tensions over the summit's objectives, Bush was all smiles as he welcomed arriving leaders, including Britain's Brown, French President Nicolas Sarkozy, Russian President Dmitry Medvedev, U.N. Secretary General Ban Ki-moon, Italian Prime Minister Silvio Berlusconi and Japanese Prime Minister Taro Aso.

"I don't think the major economies of the world will ... consent to have external control over their regulatory systems," Canadian Prime Minister Stephen Harper told reporters before arriving in Washington.

Japan backed that view. "We think the fundamental principle should be that capital flows based on the free market should continue to serve as the foundation of the global system," Japanese Foreign Ministry spokesman Kazuo Kodama said.