Finance Minister Jim Flaherty says he's working hard to convince his G20 counterparts that a proposed global bank tax is a bad idea.

"The logic of it doesn't make sense for countries that didn't have to bail out their banks to now impose a capital tax on their banks," Flaherty said at the end of a daylong meeting in Washington on Friday.

"It's not a realistic scenario."

The issue was hotly discussed at the meeting, but it appears officials moved on to other subjects without reaching an agreement on the proposal. Flaherty said that a consensus had yet to be reached on the issue, either way.

However, the Globe and Mail reported Friday that G20 central bank chiefs will not endorse a global tax on banks. The newspaper, quoting an unnamed G20 official, said that a deadlock would represent a victory for Flaherty, who initially appeared to be the odd man out on the levy.

The plan had been backed by the International Monetary Fund, the United States, Britain, France and Germany as a way to recover the cost of government bailouts of the financial industry and to raise funds for future bailouts.

The proposal is not dead in the water, however. Leaders from the G20 are still scheduled to debate a final report from the IMF on how to protect taxpayers from the cost of bank bailouts at their June summit in Toronto.

The proposal calls for countries to tax the profits and compensation of financial institutions, as well as their borrowing. The idea would be to build a fund to pay for another financial crisis, should one occur. That way, they reason, banks would pick up the tab of another bailout, not taxpayers.

But Flaherty has said the tax would create an incentive for banks to behave recklessly, because they'd feel assured their governments would bail them out again if needed.

He added that by removing capital from a financial institution to an external fund it would cut into the bank's bottom line and weaken its ability to absorb losses.

Flaherty has noted that Canadian banks performed just fine during the global recession and don't need the same protection as other financial institutions.

He added that he believes the G20 should focus instead on rules to bolster capital requirements and cap leverage of financial institutions.

Flaherty added that other leaders were beginning to share his opinion. When pressed, however, he declined to name how many leaders were now onside.

"I won't give you a count, that wouldn't be fair; let's just say there's a significant number," Flaherty said.

Meanwhile, U.S. Treasury Secretary Tim Geithner said he understood Flaherty's opinion, given the good performance of Canada's banks during the economic crisis.

Still, Geithner said there is broad consensus among nations that an overhaul of the global economic system is needed.

But the head of the IMF, Dominique Strauss-Kahn, said the levy could help to reduce the likelihood of future crises, and he is urging a multilateral approach to the issue.

G20 finance ministers and central bank governors are due to meet with the IMF and the World Bank to debate the idea and prepare recommendations to pass on to leaders who will meet at the G20 summit in Toronto in June.

Greek bailout?

While they do, another topic that will be the focus of much discussion at the three-day-long G20 meetings will be the financial state of Greece.

The debt-burdened country issued a call Friday, asking for the activation of a joint eurozone and IMF rescue to pull his country out of its crisis.

Greek Prime Minister George Papandreou said he had asked Finance Minister George Papaconstantinou to make a formal request for the plan's activation.

The prime minister says the markets have not responded positively to Greece's attempts at belt-tightening, and that it is now a "national and pressing necessity" to call for the aid.

The rescue package will provide Greece with loans from other eurozone countries to the tune of $40 billion, at interest rates of about 5 per cent, and another $15 billion or so from the IMF.

IMF Chief Economist Olivier Blanchard will likely not look favourably upon the idea. Earlier this week, he discouraged lending bail-out funds to Greece at high interest rates.

"Of course, Greece must tighten its belt to pull itself out of the trouble it got itself into," Blanchard said in the interview in Le Monde newspaper.

"But lending it rescue funds at high interest rates doesn't make sense, because it would make a recovery impossible."

With files from the Canadian Press