Gordon Brown’s hopes of leading the world out of recession at next month’s pivotal summit in London were undermined yesterday when European leaders flatly rejected calls for a further massive stimulus package.

The Prime Minister has been forced to lower expectations for the G20 summit, where leaders of the richest 20 countries will gather. Mr Brown has stopped comparing his event on April 2 to the Bretton Woods meeting in 1944 which set up the postwar world financial system. He recognises that there is no appetite to create new global institutions in the face of reservations in the European Union and the US.

The London meeting risks being overshadowed by a dispute between Europe and the US over public spending. A series of leaders at an EU summit led by Angela Merkel, the Germany Chancellor, refused yesterday to go along with American calls for greater borrowing and spending by Europe.

Amid scaled-down ambitions for the G20 Mr Brown is backing a doubling of resources for the International Monetary Fund (IMF), the lender of last resort to bankrupt governments that Bretton Woods set up. He will push for its reform to involve China and other big developing economies further.

“We are doing enough,” said Mirek Topolanek, the Czech Prime Minister, whose country holds the EU presidency.

“Some of us have not quite yet implemented our national recovery plans, so we do not know their impact. It does not make sense to introduce new packages.” In a further sign of resistance to the extra European spending called for recently by Larry Summers, chief economic adviser to President Obama, Ms Merkel also vowed to oppose further stimulus plans unless they could be shown to have immediate benefits.

“It is not time to look at more growth measures. I disagree with this idea completely. The existing measures must work. They must be allowed to develop,” she said.

José Manuel Barroso, the European Commission President, said that leaders should focus on existing measures and suggested that leaders risked causing public anxiety about the economy by proposing ever-larger rescue plans. “Instead of anticipating the next plan, let’s concentrate on implementing the plans we have,” he said.

“If the message we send to our public is, ‘our plan is not enough’, that is not going to create confidence.”

Mr Brown has shown sympathy for the US calls and on Wednesday said that world leaders’ efforts so far were not enough and that the London summit must take “further decisions”.

At last October’s EU summit Mr Brown competed with President Sarkozy of France to propose the most ambitious plans for redrawing the world’s financial architecture, but senior figures at the EU summit in Brussels yesterday poured cold water on a radical revamp of the world’s financial systems.

One leading EU figure told The Times that there was no need for the radical overhaul of existing structures and creation of new international regulators that they called for then. Instead the meeting should concentrate on better coordination between the Organisation for Economic Cooperation and Development (OECD), the umbrella group for the top 30 developed nations, and the IMF.

“Everyone agrees it is not really how many institutions you have and whether there is a new umbrella organisation,” he said. “Rather, there is increased talk about linkage between the existing institutions like the IMF and OECD.”

A senior British government spokesman denied that Mr Brown had reined in his plans for a second Bretton Woods and insisted that the idea of ripping up the old institutions and replacing them was “an impression that was never created” by the Prime Minister. Last October Mr Brown wrote a letter to EU leaders saying: “Global financial markets present challenges that no one nation can solve in isolation. We must therefore strengthen global cooperation and build a new global financial architecture for the years ahead – a new Bretton Woods which recognises the globalisation of financial risk in the responsibilities of global institutions.”

EU leaders today will hammer out their formal aims for the G20 summit and will try to appear unified around a pledge to do whatever is necessary to revive the economy and ensure that such a crisis cannot happen again.

They will also agree to fight against protectionism. Behind the consensus, though, lie deep fears among smaller countries that larger economies such as France and Germany will prioritise their industries over support for the principles of the EU’s internal market.

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