Britain and the US are firmly opposed to greater regulation of hedge funds, writes Derek Scally

Germany will push its demand for greater hedge fund regulation and transparency when finance ministers of the leading industrialised nations meet in Essen today ahead of June's G8 summit in Germany.

Berlin's call for better regulation had met with stern resistance from Britain and the United States, where most funds are based, prompting German officials to nearly abandon hope of reaching a deal. As a result, Berlin's official position has been to play down hopes - or fears - of any deal.

"There won't be any consequences after Essen," said Thomas Mirow, state secretary at the finance ministry.

Behind the scenes, however, officials believe that the falling value of the yen against the dollar and fears of a global financial crisis have moved things in Berlin's direction.

German finance minister Peer Steinbrück hopes to convince other finance ministers that Berlin is not interested in intervention in market instruments such as hedge funds.

To that end, German officials have tried to distance the current government from the "locust" label pinned on hedge funds by the Schröder administration in their negotiations with other G8 countries.

But Germany is firm in its belief that it would be in the public interest to force greater transparency through a higher information requirement on possible "systematic risks" that hedge funds face.

In plain language, Berlin wants other countries to acknowledge and act on the fact that the funds are now so established and so powerful that, if a large hedge fund collapses leaving behind a mountain of credit, it can have a knock-on effect right down to the savings of the man on the street.

The hedge fund discussion could gain momentum because of the role of the funds in the falling value of the yen.

The euro has gained 12 per cent on the Japanese currency in the last 12 months to 157 yen, while a dollar now costs more than 121 yen.

The currency has become the focus of so-called carry trade, with international investors using the weak yen and low borrowing costs to finance their investments, a risky bet that could unravel if the yen rapidly increases in value.

EU finance ministers are calling for a show of support for the currency in Essen to stop the drop in value that has hit European exporters hard, in particular the industrial machinery and car manufacturing sectors. But it remains to be seen how, or even if, the topic will be discussed in Essen, or even referred to in any final paper, judging by Japanese and US resistance.

In addition to finance ministers, the two-day meeting in the Villa Hügel outside Essen will be attended by officials from the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission.

Other issues on the agenda include climate protection and the fight against corruption in African countries.

France is anxious to raise the issue of product piracy, while Britain will press other members to match the £8.5 billion in education funding it has pledged over the next decade.

Concerns are growing among aid campaigners that the participants will not leave sufficient time to address international aid, in particular the undelivered billions promised at the Gleneagles G8 summit two years ago.

Irish singer and campaigner Bob Geldof was scathing of Germany's tardiness this week, pointing out that it had increased its aid budget by only two-thirds of the €620 million promised year on year until 2010.

"It's fine to talk about finance policy but you promised the money. Where is the money? It's needed now," he said in Berlin's Tagesspiegel newspaper.

On a personal level, Geldof was full of praise and compliments for Chancellor Angela Merkel and for her state secretary Bernd Pfaffenbach, the so-called "Sherpa" charged with sounding out positions and shaping the finance meeting agenda.

"Bernd Pfaffenbach is a clever man with the hardest job in the world, and a rocker, by the way," said the former Boomtown Rats singer. "Perhaps he would prefer to talk about Carl Perkins than George Bush ... but now [ Pfaffenbach] has to negotiate with seven other governments that don't want to do anything."

A clearly flattered Pfaffenbach said he found Geldof's rock n' roll remarks "very friendly, too friendly".

"These musicians, Bob Geldof and Bono, have engaged themselves for years for the poorest people in the world," he told foreign correspondents in Berlin. "We have to honour our commitments and do these people justice."

When pressed, however, Paffenbach admitted that he could not say whether Chancellor Merkel would be influenced by Geldof and make good on Germany's aid promises.