What would constitute success and what would imply failure at the G20 heads of government meeting (dinner tonight and what is expected to be a five hour session on Saturday)? Here are three possible sets of outcomes:

1. There is a vague statement of principles and some working groups are told to get busy. This would be my baseline view of what is going to happen. I’m not sure such an outcome would justify the carbon emissions generated by bringing 19+ heads of government (and some large entourages) to Washington – a conference call would have probably sufficed. But, as long as they agree to meet again reasonably soon (yet surely after January 20th), perhaps we may see the beginning of a process in which industrialized countries engage more productively on global economic and governance issues with large emerging markets.

2. In terms of upside, it would be great to see progress – perhaps more on the sidelines than in the main communique – on three main points. (For more on why these measures would be helpful, please see our latest baseline and, if you want even more, follow the links provided there.)

First, more fiscal stimulus from various countries could be announced. China, Germany and now it seems the UK have put something on the table. We’re still waiting for the French – perhaps they are waiting for a dramatic moment. But this US administration seems to be backing away from further stimulus, as well as away from supporting key, potentially systemic parts of the economy.

Second, more funding for the IMF could be put in place, at least on an interim basis. I really do not buy the argument, now heard in some official circles, that “the money will be there if the IMF ever needs it.” Have we learned nothing from the spectacular failure of a case-by-case-over-a-weekend approach to financial institution problems in US and Europe?

Third, serious discussion of the problems within the eurozone, and what can be done to head these off, could take place. I think some Europeans wanted this summit (and it was their idea) largely to show their domestic audiences that they can have global impact. Well, they certainly can have big – negative – global impact, if they don’t act quickly to shore up the eurozone.

3. In terms of downside, I would be afraid of some sort of public argument or spat. There may be a temptation for some countries to generate sparks. This could have political value for some electorates, but the effects on market confidence would not be good. I hope that whatever happens in the National Building Museum (the site of the plenary session) stays in the National Building Museum.

We should have some indications of how things are going by the end of Friday (today). Any big announcements will probably be floated or previewed in some way by 11pm Washington time. We’ll know a lot more after the end of the formal meeting, mid-afternoon Saturday, when we’ll see the final communique. Then, of course, come the press conferences and the spin.

And, in case anyone has forgotten the lessons of October 10th-12th (when the Europeans did a spectacular last minute U-turn on bank recapitalization), most of Sunday – US time – is also available. So feel free to go home and announce major new policy initiatives. But it’s not all of Sunday, as Asian markets open in the early evening US East Coast time, and their initial reaction can influence the broader passing of market judgment on Monday.

As we learn relevant things during the weekend, we will post the details; just subscribe – it’s free – to our feed or email updates if you are interested (see top right corner of our home page for details).

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