SEOUL (Reuters) - The Group of 20 labored to agree how to put the world economy on a sounder footing on Thursday as fears about Ireland’s ability to pay its debts underscored lingering fallout from the global financial crisis.

The G20 hoped to use a two-day summit to recapture unity forged in the depths of the crisis two years ago in order to soothe exchange rate tensions generated by imbalances between cash-rich exporting nations and debt-burdened importers.

But even as U.S. President Barack Obama voiced confidence leaders would find a formula for more balanced and sustainable growth, negotiators squabbled over the wording of a closing statement to be issued when the summit ends on Friday.

“The persistence of these imbalances is a problem in the long term and these things have to be addressed,” said Canadian Prime Minister Stephen Harper. “Will they be addressed at this conference? I’m not so sure, but I think we’re getting a more frank discussion on some of these matters, that they do have to be resolved.”

The meeting has been billed as a chance for rich nations to strike a grand bargain on how to rejuvenate the world economic order with emerging powerhouses like India and China.

But leaders appeared unlikely to venture far beyond agreements reached by their finance ministers last month.

“The real issue is, given that it is a problem, how do we coordinate policy? I don’t think you should be too demanding ... because such policy coordination has never been attempted before,” India’s chief G20 negotiator, Montek Singh Ahluwalia, told Reuters.

SNIPING AT THE FED

A major irritant in the run-up to the summit has been the Federal Reserve’s $600 billion bond-buying spree to revive the U.S. economy, which emerging markets fear will trigger a flood of money into their markets, boosting inflation and asset prices.

Former Fed Chairman Alan Greenspan stirred that pot, saying the U.S. central bank’s policy was deliberately weakening the dollar.

“The U.S. will never do that,” U.S. Treasury Secretary Timothy Geithner shot back in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

Geithner again criticized China’s currency policies, saying the world’s second-largest economy risked stoking inflation pressures. China earlier reported that consumer price inflation had hit a 25-month high in October.

Yu Jianhua, an official with China’s Ministry of Commerce, said Beijing had no intention to confront the United States over currencies or trade issues.

But, Yu added, Washington “should not politicize the yuan issue, should not blame others for its domestic problems and should not force others to take medicine for its own disease.”

A source with Russia’s delegation weighed in, criticizing “unilateral decisions” by some countries to weaken their exchange rates that could spark fears of global currency wars.

Obama, speaking after a meeting with South Korean President Lee Myung-bak, said he was confident leaders would support a program for promoting balanced growth, building on a agreement reached at a G20 summit in Pittsburgh in 2009.

“I don’t think this is a controversial proposition,” he said.

Slideshow ( 16 images )

The world has been spared an outbreak of protectionism since the crisis. But the cocktail of low growth and high unemployment is making it harder for politicians to muster support for opening their markets wider.

Despite the presence of Lee and Obama, South Korea and the United States failed on the sidelines of the summit to finalize a long-stalled stalled free trade deal.

SLOW PROGRESS

Lee said a “little bit” of progress had been made since G20 finance ministers met in Gyeongju, South Korea, last month but deep divisions remained over how best to reduce imbalances.

Slideshow ( 16 images )

A draft of the final communique showed the leaders would back the idea of “indicative guidelines” to narrow surpluses and deficits on the current account, the broadest measure of trade.

However, they were undecided on whether these would be based on indicators that are “measurable” or, more vaguely, “quantitative and qualitative.”

Russian Finance Minister Alexei Kudrin said the G20 may agree on steps to introduce macroeconomic policy targets with parameters along the lines of the Maastricht Treaty. The EU’s Maastricht Treaty set limits that needed to be met by nations in order to qualify for adoption of the euro currency.

“There will be a road map and within this road map work will be done to prepare such proposals and define the timeframe,” Kudrin told reporters.

An idea floated last month by Geithner to shrink imbalances to agreed numerical ranges has now been taken off the table.

Kudrin said that while Geithner’s proposal was “interesting”, other targets such as fiscal deficit, and debt levels would also need to be considered.

The draft showed G20 members would agree to “refrain from competitive devaluation” of exchange rates, but they were debating whether to include the words “competitive undervaluation” -- a euphemism for Washington’s dim view of China’s currency stance.

China’s yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June.

Washington has welcomed the slow-but-steady appreciation, although it has said the rate of climb needs to be swifter.

Ireland, deep in red ink due to the 2008 financial meltdown and ensuing recession, saw the yields on its bonds spike to a record high over those of Germany, the euro zone benchmark.

Ireland’s fragile government is battling to convince investors that it will not become the second member of the euro zone, after Greece, to need an emergency bailout.

European Commission President Jose Manuel Barroso said the European Union had the means to help Ireland, but he did not commit the bloc to a fresh course of action.

“What is important to know is that we have all the essential instruments in place in the European Union and euro zone to act if necessary, but I am not going to make any speculation,” he told reporters on the margins of the summit.

Students in Britain rioted over rising tuition costs, part of the government’s post-crisis austerity measures, but in Seoul, there were only sporadic anti-G20 demonstrations.