London -- Leaders wrangled Wednesday on how to fix the global economy, with France and Germany demanding tough action by a 20 nation summit and President Barack Obama warning the United States would stop being a "voracious consumer".

French President Nicolas Sarkozy, who has threatened to walk out of Thursday's London summit, said France and Germany rejected the current summit proposals on reforming the financial system and cracking down on tax havens and corporate bonuses.

Obama and British Prime Minister Gordon Brown, who is struggling to bridge the G20 summit gap, played down the differences but not the scope of the crisis that the summit will have to confront.

"Make no mistake, we are facing the most severe economic crisis since World War II, and the global economy is now so fundamentally interlinked that we can only meet this challenge together," the president said.

But he insisted that while the summit had a duty to produce "the most substantive outcome possible," the "separation between the various parties has been vastly over-stated."

Obama has said stimulus and regulation are needed but looking forward to better days he said the United States could not shoulder all the responsibility for creating new growth.

The United States will have to tackle its huge deficits so while the world has long seen the superpower as a "voracious consumer" that will have to change, Obama said.

"Everybody is going to have to pick up the pace and I think that there is a recognition based on the conversations that I've had with leaders around the world that that is important," he said.

With thousands of anti-summit demonstrators gathering in London's financial district, representatives of the Group of 20 leaders negotiated through the night seeking to overcome the rift on the summit communique.

But Sarkozy said there had been no agreement. "Neither France nor Germany are satisfied with the proposals as they currently stand," said the French leader who has threatened to walk out of the summit if the measures are not bolstered to his liking.

"I will not associate myself with a false summit, that concludes with a statement of hollow compromises, that does not address the problems that we face," he warned.

German chancellor Angela Merkel voiced her concern before leaving Berlin.

"I am going to London with a mixture of confidence and concern. Concern on one hand on whether we can really react to the serious situation ...Confident, however, that ... we cannot stick our heads in the sand," she said.

Merkel has spoken out against governments like the United States and Britain spending their way out of the crisis.

But her fears were dismissed by Prime Minister Taro Aso of Japan, whose country has spent massively over the past decade seeking to re-ignite the economy.

"Because of the experience of the past 15 years, we know what is necessary, while countries like the US and European countries may be facing this sort of situation for the first time," Aso told the Financial Times newspaper.

China's President Hu Jintao headed for London reaffirming calls for reform and efforts against protectionism.

"The international financial system should undergo necessary reforms in an all-round, balanced, gradual and effective manner to prevent a similar crisis in the future," the state Xinhua news agency quoted him as saying.

Australian Prime Minister Kevin Rudd said: "We have an obligation as leaders to produce the most substantive outcome possible from G20 summit because working people across the world depend on this."

After talks with Brown, Obama was to hold first face-to-face meetings with Hu and Russian President Dmitry Medvedev, and attend an official reception with Queen Elizabeth II at Buckingham Palace.

Meanwhile French diplomats said President Sarkozy was also to hold talks with China's Hu.

Relations between China and France deteriorated sharply last year when Sarkozy decided to meet exiled Tibetan spiritual leader the Dalai Lama in December, and the two men had not been expected to meet in London.

Protests against the summit started, with thousands of noisy demonstrations in the City financial district, while some 2,500 police were deployed across the city to protect the arriving leaders.

The G20 comprises the seven industrialized powers -- Britain, Canada, France, Italy, Japan, Germany, and the United States -- plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. The European Union counts as the 20th member.

Katherine Haddon/AFP/Expatica