G20: Deal? Or no deal?

Brown and Obama demand new bailouts – then claim to be on brink of global accord for 'recovery and reform' as Sarkozy and Merkel say no stimulus – then insist on tough rules to give 'capitalism a conscience'

Nicolas Sarkozy, the French President, and Angela Merkel, the German Chancellor, also rebuffed a plea by Barack Obama for them to stimulate their economies further to help kick-start a worldwide recovery.

The surprise Franco-German offensive, launched at a joint press conference in London last night, left Mr Brown, as the summit chairman, battling to broker a deal ahead of the critical meeting at the ExCeL Centre in London's Docklands. Over a working dinner of the G20 leaders at Downing Street last night, the Prime Minister was trying to persuade emerging economies, particularly China, to swallow some of France and Germany's demands on financial regulation.

British officials claimed that M. Sarkozy and Ms Merkel are playing to their domestic audience. They dismissed the French President's threat to walk away from the summit, saying he would not want to be blamed for wrecking it and predicting that he would claim victory today.

However, Mr Brown is more worried about Germany's opposition to an immediate further fiscal stimulus. Berlin may also object to a proposal for the International Monetary Fund to "name and shame" countries which should do more to boost global growth.

On a day of frantic negotiations, Mr Brown met five G20 leaders for one-to-one sessions and spoke to others, including M. Sarkozy, on the telephone. The leaders saw at least five different draft communiques during the course of yesterday.

Although the Prime Minister said the leaders could be hours away from agreeing a "global plan for economic recovery and reform", the intervention by France and Germany threw a last-minute spanner into the works.

Setting out their demands for a deal, the leaders declared that the summit must focus on cracking down on tax havens, reforming the financial system and tackling the bonus culture among bankers, rather than the need for more government spending or tax cuts. They warned against a "vague" communique today, saying that moves to tackle the root causes of the crisis could not be put off until another summit.

It was a deliberate riposte to a joint press conference earlier yesterday by President Obama and Mr Brown, who agreed that countries should boost their spending to ensure the recession ends as soon as possible. In a broadside against the "Anglo-Saxon" economic model and "light touch" regulation blamed for the crisis, M Sarkozy said: "This is a historic opportunity afforded us to give capitalism a conscience, because capitalism has lost its conscience. We have to seize this opportunity.

"These are our red lines. We are totally prepared to discuss other things so long as these issues are clearly dealt with and solved."

On tax havens, he said a blacklist of countries that refused to be bound by international standards should be published either today or within days. The French President said: "Germany and France will speak with one and the same voice. We are aiming for the same objective in terms of principles and in terms of how to apply those principles. This is nothing to do with ego or temper tantrums, this has to do with whether we are up to the challenges ahead or not. Of course we have to make compromises ... but compromise has to be engaged in by all regions of the world, especially as the crisis didn't actually spontaneously erupt in Europe, did it?"

Bernard Kouchner, the French foreign minister, said he expected a confrontation at the summit between "two worlds: one that wants more regulation, and the other that wants less and which is closer to so-called 'liberal' positions".

Ms Merkel warned that today's summit would be a failure if it only produced a vague statement of intent. "We want results that yield concrete results and change the world as we know it," she said. "The day after tomorrow will be too late. The decisions need to be taken today and tomorrow."

President Obama, who praised Mr Brown's "extraordinary energy and leadership" at their joint press conference, endorsed his call for other countries to stimulate their economies further. Although he played down the transatlantic split, the President said other nations could not rely on America's "voracious consumer market" to drive the global recovery. "It cannot just be the United States that's the engine room – everybody is going to have to pick up the pace," adding: "Don't short change the future because of fear in the present."

Mr Obama, on his first visit outside North America since being elected President, said he had come to "listen, not to lecture" but added: "We must not miss an opportunity to lead." Mr Brown said today's summit should not produce merely a "lowest common denominator" solution. "We must stand united in our determination to do whatever is necessary," he said.

He added: "We have some tough negotiations ahead. They will not be easy." His official spokesman said later: "We are making good progress but we are not there yet."

David Cameron met Mr Obama for 30 minutes at the President's request. The Tory leader said that there had been a "wide range of agreement" between them. He denied he was at odds with the President over a fiscal stimulus, saying that it was a good thing if countries could afford it, but Britain could not.

Mr Cameron clashed with Mr Brown in the Commons, where he said the Bank of England Governor Mervyn King had "snipped up his credit card" by cautioning against a further fiscal stimulus. "Once the talks are over, Britain will still be left with the most appaling public debt," he told Mr Brown, adding: "We should never leave Britain this exposed again."