France played down hopes on Monday of clinching a deal at a meeting of G20 finance ministers this week that would push forward efforts to deal with global economic imbalances, although it said that remained its goal.

The divide over which indicators should be used to measure imbalances -- a starting point for dictating what needs to be done to make the world economy work better -- is the latest sign of renewed discord in the group of leading powers.

President Nicolas Sarkozy has had to scale down his ambitions to revamp the international monetary system during a year-long stewardship of the G20, instead focusing on targeted reforms like the list of indicators and commodity regulation.

But even those generate strong differences, only two years after the group found consensus on a grand plan to deal with the financial crisis and prevent future repeats. We hope ... to reach agreements (this week) on economic performance indicators which will allow us to measure the way toward the optimal point, Economy Minister Christine Lagarde told a news conference.

Our hope is to reach agreement on indicators as soon as next Saturday. If we do not, it is not a drama.

A summit in Seoul last year mandated France to reach agreement in the first half of 2011 on a list of indicative guidelines for quantifying imbalances -- the most obvious of which include China's huge trade surplus and Germany's dominance of its European peers on exports.

BEIJING ISSUES

Disagreement has persisted between rich and developing nations over which indicators to select, with G20 officials saying China in particular is resisting pressure from developed nations to include factors like real effective exchange rates and the level of foreign assets.

Lagarde told the Financial Times in an interview published on Monday that a combination of political posture and positioning was making progress difficult only days away from meetings on Friday and Saturday.

She said that while there was a basic understanding that any indicators should measure commercial imbalances, there was a long debate on whether to include the trade balance with its flows of products and whether to include flows of services.

G20 officials say that China would prefer to be assessed on its trade account, which it has pledged to gradually reduce as it boosts domestic demand, rather than on its current account.

The current account would include interest payments on China's nearly $3 trillion in reserves which reflect its accumulated past trade surpluses.

Data on Monday showed China's trade surplus fell to its lowest in nine months in January after imports surged, supporting the government's case ahead of the G20 meeting that it is doing enough to spur domestic demand without speeding up currency appreciation.

NOT SEEKING COMMODITIES CONTROLS

European Union members of the G20 want the list to include current account balance, public deficit and debt, private debt, savings ratio, net foreign asset position, reserve adequacy and real effective exchange rates, according to an EU document obtained by Reuters.

Lagarde said that if the meeting this week could seal agreement on the list of indicators, then deciding numeric limits on them would be the next stage. Ministers from the group meet again in Washington in April.

Bank of France Governor Christian Noyer, who will host his fellow G20 central bankers this week, said the debate on imbalances was not intended to be a finger-pointing exercise at countries with large deficits or surpluses.

The exercise consists of looking for the structural weaknesses of each of the 20 countries to see how they can be reduced, he said at the same event as Lagarde, citing the examples of savings and investment.

France has also made seeking agreement on tougher regulation to curb volatility in food and fuel prices a priority.

But here too it faces a deep split between major producers of commodities who oppose draconian market curbs, and the big consumers of commodities who want greater control of prices.

Lagarde tried to assuage what she said were concerns voiced by large emerging economies such as Brazil. We do not want to propose that prices are administered, not at all, she said.

As part of French President Nicolas Sarkozy's aim of reshaping the international financial system, Paris is also pushing for the inclusion of China's yuan currency in the basket of currencies underpinning the IMF's Special Drawing Rights -- part of a shift toward what Sarkozy dubs a multipolar world.

Lagarde stressed, however, that China would have to meet conditions on the convertibility of the yuan and liberalize its current account for its currency to be included in SDR.

(Additional reporting by Jean-Baptiste Vey and Marc Angrand; editing by Patrick Graham)

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