The report by 20 experts including former U.S. Secretary of State Henry Kissinger, former Federal Reserve Chairman Paul Volcker and former European Union Commissioner Leon Brittan, came out two weeks before the June 1-3 summit in Evian, France.

The "Shadow G8" also described mounting U.S. budget deficits as alarming, saying Washington should avoid new tax cuts, and said leaders at this year's summit should help boost world trade by pledging to scrap all industrial goods tariffs in a decade.

"The widespread charge that the G8 is both undemocratic and hegemonic stems fundamentally from its asking others to do what it is unwilling or unable to do itself," said the report issued through the French Institute for International Relations (IFRI).

"The apparent unwillingness of the G8 members to criticise themselves, combined with their revealed proclivity to criticise others, has produced a crisis of legitimacy," it said.

Leaders of the 28-year-old Group - from the United States, Japan, Germany, France, Britain, Italy, Canada and Russia - meet annually to coordinate their economic and trade policies.

But "out of area issues" such as financial crises in Latin America and Asia or debt and disease in Africa have increasingly crept onto their agenda, sometimes taking centre stage as G8 policy coordination shifted to the back burner, the report said.

The "Shadow G8," which began offering recommendations to these summits three years ago, said Group members must overcome tensions caused by the war in Iraq and focus on jointly tackling the economic aspects of current security problems.

WORLD ECONOMIC PROBLEMS

Reviewing world economic problems, the report said the summit should urge the United States "to avoid any new tax cuts that are not aimed at immediate stimulus and to freeze the sizable tax cuts that are now scheduled."

Leaders should ask Europe to reform labour markets and pension systems, make the eurozone's Stability and Growth Pact more flexible and modify the European Central Bank's guidelines to aim for an inflation target of one to three percent. The ECB currently defines price stability as anything below two percent.

As for Japan, it recommended the summit urge Tokyo to write off non-performing loans in the banking system, expand reserves to the financial system, provide further short-run fiscal stimulus and deregulate the economy aggressively.

"The most dramatic step that the G8 leaders could take at Evian...would be an agreement to eliminate all of their tariffs on industrial products by a certain date (perhaps 2015 or 2020)," the report added.