With the global economy facing its severest challenge since the oil shocks of the 1970s, two European members of the Group of Seven industrial powers this week sketched plans for urgent reform of the International Monetary Fund and World Bank.

The gathering on Friday evening will give the EU as a whole its first opportunity to respond to French proposals to back temporary foreign exchange controls for countries in crisis and forge closer policy coordination between Europe and the US.

For a reworking of institutions like the IMF and G7 to be effective, the EU must first resolve the thorny issue of who should represent the 11-nation euro currency zone in the international arena.

"The top priority this weekend will be progress on the question of the external representation of the euro-11," saidan Austrian finance ministry official.

Early reaction to the French ideas, which followed Britain's call on Monday for better supervision and regulation, could come from EU Commission president Jacques Santer and Bundesbank president Hans Tietmeyer who are due to address a separate conference on Friday morning.

The EU's monetary affairs commissioner Yves Thibault de Silguy is also scheduled to speak in Vienna before the Ecofin meeting gets underway.

Calls for change come after emerging market dominoes tumbled throughout Asia, adding to Russia's financial catastrophe and forcing top western banks to write off billions of dollars. Discussions will be tough.

IMF managing director Michel Camdessus will join EU ministers on Saturday to review the crises in Asia, Russia and Latin America, and British finance minister Gordon Brown will speak in his capacity as acting G-7 chairman.

But officials cautioned that EU progress on the global role and representation of the euro zone may be slow. France proposed onThursday that G-7 members France, Italy and Germany take turns to represent the euro zone abroad on an annual basis.

This is likely to run into opposition from Spain and smaller EU nations and will find little favour with Austrian finance minister Rudolf Edlinger, who will chair the two days of talks.

Edlinger will brief his colleagues on the results of his fact-finding visit to meet Russian monetary officials in Moscow earlier this week. He will also table a working paper on closer coordination of taxation among EU states.

On Friday afternoon, Euro-zone ministers will begin a discussion on the budget outlook for 1999 and beyond with their colleagues from the four countries not taking part in Economic and Monetary Union (EMU).

On Saturday, ministers are expected to agree fluctuation bands for the Greek drachma and Danish crown in the planned ERM-2 exchange rate mechanism.

Discussions about EU taxation policy and the future of the EU budget are also scheduled to take place.