US President Barack Obama has arrived in the United Kingdom for his first major foreign trip since taking office in January. “The stakes for this summit are very high,” Mike Froman, Obama’s deputy national security adviser for economic affairs, told reporters in London. “They are magnified by the fact that much has happened since the last G-20 summit in November.”

Froman said there is a consensus “to expand the scope of regulation to any institution, market or product that’s systemically important to the international financial system and that could include hedge funds.”

He said the G-20 countries want to “encourage” off-shore financial or tax havens to sign on to global accounting and transparency rules.

“There are a number of things in the toolbox that might be available and that’s what’s being discussed this week,” he said, declining to elaborate.

How to craft the incentives and how to refer to such tax havens “will get worked out over the next couple of days,” he said.

The US President was met at Stansted Airport, north of London, by UK Chancellor of the Exchequer Alistair Darling and a senior official from the US Embassy.
Before the start of the G20 summit of world leaders on Thursday, Mr Obama will hold extensive talks with Gordon Brown, meet the UK opposition leader David Cameron and have a private gathering with the Queen.

The president is also scheduled to hold bi-lateral meetings with Russian President Dmitry Medvedev, Chinese President Hu Jintao, Indian Prime Minister Manmohan Singh, South Korean President Lee Myung-bak and King Abdullah of Saudi Arabia. 

The gathering in London is being held as the effects of a recession triggered by the crisis in financial markets has intensified since the leaders last met in Washington. The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3% this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent.

UK Prime Minister Gordon Brown, who will host the meeting, said today that the talks must deliver “oxygen of confidence” to the world economy. He said yesterday that a deal among the nations will “not be easy.”

G20 countries are also divided over the size of their respective stimulus packages.

Some US commentators have called on European governments to increase the size of their stimulus efforts. In response, some European leaders have argued that the economic crisis began in the US, and that America's stimulus package should therefore be more robust than other nations'.

"This crisis started in the United States," said Luxembourg's Prime Minister Jean-Claude Juncker last week.

"The Anglo-Saxon world has always refused to add the dose of regulation which financial markets, the international financial system needed," he added. 

German Chancellor Angela Merkel is reported to have said that chances were high that deals - for example, to regulate hedge funds - would be reached.

"Despite the back and forth in the press, nobody at any point has any expectations that countries would come to this meeting... and say 'I am going to do another point of stimulus,'" Froman said.

"That is not what these summits are about, this is not a pledging conference. Right now there is vigorous debate in Europe as to whether more stimulus is necessary or prudent."

"Countries have done stimulus, those stimulus plans are being implemented, and from our point of view, all that is necessary down the road, if growth is not restored, how will countries react?"

New hints of division emerged on Tuesday after French Finance Minister Christine Lagarde said France was prepared to "walk away" from the summit if it fails to secure agreements on issues it wants.

"President (Nicolas) Sarkozy was very clear on that front, he said if the deliverables are not there, I won't sign the communique," Lagarde, who spoke in English, told the BBC. "It means walking away. I think he's very determined."

On a visit to the central French town of Chatelleraut, Sarkozy said there was "no choice" but for the summit to get results.

"The crisis is too serious for us to hold a summit for nothing," he added.

Froman also said that though the final shape of the Group of 20 communique was still being hammered out, the shape of a consensus was emerging.

"There is agreement for example to expand the scope of regulation to any institution, market or product that is systemically important to the international financial system and that could include hedge funds."

He also said that recommendations would be made on capitalizing debt-ridden financial institutions.

"My sense is that there will be a credible and legitimate package of steps both on the restoring side and on the regulatory reform side."

On Friday, Mr Obama will travel to Strasbourg, France, where he will hold talks with French President Nicholas Sarkozy, and stage a "town hall"-style meeting, before heading over the border to Baden-Baden in Germany for a meeting with Ms Merkel.

He will also attend the Nato summit on Saturday in Strasbourg, where talks are expected to focus on the ongoing military operations in Afghanistan.

The US President will then head off to the Czech Republic to attend the EU-US summit, before travelling on to the Turkish capital, Ankara.

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