There will be considerable discussion about the European economy at the G20 meeting of finance officials and central bankers in Busan, South Korea, this weekend, a senior Canadian finance official said on Monday.

The official told a briefing that the euro zone debt problems added new urgency to the need for countries to design credible plans to withdraw extraordinary stimulus from their economies next year.

Canadian Finance Minister Jim Flaherty also plans to stress at the meeting that many countries are reaching their limits in terms of fiscal stimulus.

The Busan meeting will let finance officials prepare the groundwork for a leaders' summit in Toronto in June. It will focus on financial reform, including a proposed global bank levy, and start spelling out policies needed to rebalance the global economy as it starts to grow again, the official said.

For example in large surplus countries like China, a more flexible currency would help boost domestic consumption, the official said.

Canada has vocally opposed proposals for a global bank levy to ensure taxpayers don't bear the cost of future financial meltdowns.

But the official said Canada has received growing interest for its proposal for contingent capital, which would require banks to hold a substantial part of their capital in securities that could be converted to equity in a near-death experience.

Finance Minister Jim Flaherty will present more details of that alternative to his counterparts in Busan.

The official also said the G20 finance officials will seek progress on commitments that countries have made to eliminate inefficient fossil fuel subsidies.

(Reporting by Louise Egan; editing by Janet Guttsman)

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