By Veronica Smith

ISTANBUL, Oct 06, 2009 (AFP) - World finance chiefs worked to bolster a fragile economic recovery in Istanbul on Tuesday but cracks emerged as Germany warned against a rise in IMF resources paid by members.

At annual meetings of the IMF and World Bank in the Turkish financial capital, Europe's largest economy, Germany, threw a spanner in the works of a plan to significantly boost the resources of the International Monetary Fund.

German central bank governor Axel Weber said the IMF's proposal for a massive increase in its resources so that it could function as a credible global bank of last resort for countries was fraught with risks.

"We are not convinced that the IMF should assume a general insurance function for public sector liabilities. This would risk setting the wrong incentives both for borrowers and investors," he said.

Some IMF member states have pledged to increase the Washington-based institution's resources by more than 500 billion dollars (339.5 billion euros) to boost its lending capacity to countries hit by the global economic crisis.

Germany has lent 15 billion dollars to the IMF under this commitment.

The IMF has given out tens of billions of dollars (euros) of credit in recent months to prop up faltering economies around the world and the World Bank has stepped up its lending for 2009 to record levels.

Weber's statement cast a cloud over a recent decision by a committeee representing the fund's members recommending an increase in IMF resources as the first day of the two-day meeting got under way.

Finance ministers and central bank governors from 186 nations hammered out strategies for sustainable growth and reform of the global financial system at the crux of the crisis.

IMF chief Dominique Strauss-Kahn earlier called for global economic cooperation that would build on efforts by the Group of 20 (G20) over the past year and which have averted the collapse of the world economy.

"We seem to have pulled back from the brink, and even if as we all know it is much too early to declare victory, we have at least stepped onto the road of recovery," the IMF managing director said.

Strauss-Kahn said that cooperation must extend beyond the G20 biggest rich and emerging countries to the forum of the IMF, urging the 186 countries to "seize this opportunity to shape the post-crisis world."

China, which has led the nascent rebound, warned that it has not yet seen its own recovery take root and will keep in place its massive economic stimulus for the time being.

"We are seeing more positive signs and an upward trend in the Chinese economy. However, we are also soberly aware that the economic rebound is yet to be stable, firm, and balanced," Chinese Finance Minister Xie Xuren said.

The finance chiefs were also to tackle reform of the voting power in the two institutions to better reflect the growing weight of the emerging market and developing countries in the global economy.

Meanwhile, the United Nations called for a new global reserve currency to end dollar supremacy which has allowed the United States to build a huge trade deficit that has helped foster the global imbalances that stoked the crisis.

"Important progress in managing imbalances can be made by reducing the reserve currency countrys 'privilege' to run external deficits in order to provide international liquidity," said Sha Zukang, UN undersecretary-general for economic and social affairs.

The Chinese UN official called for "greater use of a truly global reserve currency, such as the IMFs special drawing rights (SDRs)," the fund's reserve asset, would benefit global development.

The delegates are to consider a shift of power of at least 5.0 percent from over-represented countries to under-represented countries in the IMF, and a similar transfer of at least 3.0 percent at the World Bank.

"This will enhance our legitimacy," Strauss-Kahn said.

World Bank president Robert Zoellick urged members to go beyond the reform already supported to give developing countries at least 47 percent of the voting shares of the institution, and raise it to 50 percent.

Outside the meetings there were clashes in the streets of Istanbul, Turkey's biggest city and commercial capital, between police and some 1,500 protesters.

Around 100 protesters were arrested following the confrontations.

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Copyright AFP 2009.