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ST. PETERSBURG, Russia (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 took the lead in responding to economic crisis in 2009, is now at odds as the U.S. recovery gains pace, Europe lags and developing economies face blowback from the looming 'taper' of U.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.
"Therefore 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 to address security matters over dinner after their traditional debate on the world economy.
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 normalization of monetary policies needs to be effectively and carefully calibrated and clearly communicated," the BRICS - Brazil, Russia, India, China and South Africa - said in a joint statement.
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.
Vulnerable countries, including G20 member India, will need to take steps to rebalance their own economies, China and Russia said, ruling out bailouts for countries that have hit trouble.
Washington also said emerging economies would have to do their homework, as it adjusts policy following the U.S. economy's recovery from a "grave crisis".
"Emerging economies, increasingly ... will have to look within their own borders for demand," Deputy National Security Adviser Ben Rhodes said.
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 program.
The Fed is widely expected this month to take a first step to reduce the extraordinary monetary stimulus - a move amply justified by the state of its 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 euro zone.
"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 ECB said it was ready to cut interest rates or pump more money into the euro zone economy if necessary to bring money market rates down and help the recovery.
The high debt burden piled up by the industrialized West has also driven calls from other members of the G20 - which accounts for 90 percent of the world economy 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 behind-the-scenes clashes.
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.
Leaders were expected to sign off on a series of initiatives intended to fight cross-border tax evasion, strengthen financial oversight and streamline regulation of derivatives that have the potential to trigger another financial markets meltdown.
One G20 source said the collective will to tighten up on the regulation of so-called 'shadow' banks appeared to be slipping. Risky off-balance-sheet structures were widely blamed for intensifying the fallout from the 2008 collapse of U.S. investment bank Lehman Brothers.
Reporting by Lidia Kelly, Katya Golubkova, Matt Spetalnick, Alessandra Prentice and Randall Palmer. Writing by Douglas Busvine, editing by Mike Peacock