The world's most affluent nations will take decades to work off the biggest build-up in debt since World War II. The political costs may be permanent, laid bare at this week's Group of Eight summit of leading industrial powers.

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114pc of gross domestic product (GDP) in 2014, more than triple the 35pc of the main emerging economies including China, the International Monetary Fund (IMF) forecasts.

The run-up in debt has hastened a power shift that is sapping the industrial world's authority to impose its economic doctrine, currency arrangements or greenhouse-gas reduction strategies.

Even some G8 officials acknowledge that the group has lost its grip amid the global recession they spawned.

The eight-nation forum that starts tomorrow in L'Aquila, Italy is "a lot less relevant given its make up and given developments in the world", French Finance Minister Christine Lagarde said on Sunday.

"Big players, like emerging economies India, China or Mexico, are invited, but they're given only a jump seat outside of the main summit."

Industrial world

The industrial world is beset by the harshest economic conditions in a lifetime: a projected US budget deficit of 13.6pc of GDP in 2009, unmatched since World War II; an annualised 14.2pc contraction in Japanese GDP in the first quarter, also the worst since the war; in the first three months of 2009, German exports had their steepest quarterly decline since 1970 when the data were first compiled.

Reflecting the relative fortunes of the G8 and emerging markets, developing nations' share of worldwide stock-market capitalisation has climbed to a record 24pc from 15pc at the start of 2007 as investors piled into the fastest-growing economies.

"Despite a global economic contraction and some uncertainties over growth in domestic demand, China's economic recovery will continue," Zhang Jianhua, head of the central bank's research bureau, said in this month's 'China Finance' magazine.

While the surge in borrowing has prompted calls for alternatives to the dollar as a reserve currency, emerging-markets policy makers aren't near consensus on a plausible option. Chinese Deputy Foreign Minister He Yafei said last week that the dollar will reign supreme for "many years to come".

Staunching the recession, combating climate change, promoting trade and dealing with Iran top the agenda of the G8, a grouping which represents 880 million people with a combined GDP of $32trn (€23trn) that includes the US, Japan, Germany, Britain, France, Italy, Canada and Russia.

Divisions persist over dialling back stimulus measures -- Germany says now is the time to begin curbing deficits -- and the scope of financial oversight. Britain opposes more intrusive market oversight proposed by the European Union.

"Different countries are pulling in different directions and that is, I think, quite troubling," said Niall Ferguson, a history professor at Harvard University in Cambridge, Massachusetts.

The uncoordinated response is "one of the classic symptoms of a global crisis".

G8 meeting

While the eight deliberate, leaders of five developing economies -- China, India, Brazil, Mexico and South Africa -- hold a parallel summit nearby before the G8 meeting.

Led by China, the emerging economies don't share the "sombre fiscal outlook" of the affluent world, the IMF says.

The IMF says the debt won't be repaid as quickly as after World War II, which ended with debt topping 250pc of GDP in the UK, 200pc in Japan and 100pc in the US.

In wartime, governments exercised "comprehensive control" over the economy and citizens felt a "moral duty" to buy war bonds, the IMF said in a report published on June 9.

Rich nations' debt constituted 78pc of GDP in 2006, the year before the financial crisis took hold, while emerging-markets debt has dipped from 38pc, the IMF says.

The industrial world's borrowing spree "decreases its ability to manoeuvre", said Paul Hofheinz, president of the Lisbon Council, a Brussels research group.

Underscoring the need for a broader global consensus, leaders of the Group of 20 nations have met twice in response to the global financial crisis since the G8 gathered in Japan last year and plan a third summit in Pittsburgh on September 24 and 25.

Lesser-developed countries upstaged the 2008 G8.

Arguing that emissions' cuts would stunt the economic growth that is lifting millions out of poverty, they forced through a joint statement allowing countries to tackle global warming according to their "respective capabilities".

The climate clash will be rerun in L'Aquila, as the countdown starts to a United Nations summit in December to hammer out a replacement to the Kyoto Protocol.

Dual role

Russia plays a dual role, straddling the G8 and acting in concert with developing economies.

In a sign of the shifting world order, Russia last month hosted the first-ever summit of the BRIC economies -- Brazil, Russia, India, China -- financiers of $1.1 trillion in US Treasury debt as of April.

How much US debt to keep remains in dispute.

Russian President Dmitry Medvedev and Indian economic adviser Suresh Tendulkar have questioned the dollar's dominance of the world's $6.5trn in currency reserves.

The BRIC get-together failed to endorse a Russian call for diversification from the dollar, showing it is easier to denounce the US-led world order than come up with a viable alternative.

"The credibility of the Anglo-Saxon model is under threat," Mohamed El-Erian, chief executive officer of Pacific Investment Management Co, said in a web commentary last month.

"Yet there are no ready substitutes that are able and willing to step in." (Bloomberg)

- James Neuger