President Dmitry Medvedev and German Chancellor Angela Merkel are likely to focus on economics in St. Petersburg on Thursday as they meet for the fourth time this year.

The annual meeting of select members from the two countries' cabinets, held since 1998 alternately in Germany and Russia, will this time focus on the global financial crisis and the conflict in Georgia, but both sides will try to avoid clashes, officials and analysts said.

The leaders are also expected to discuss initiatives to establish a new, legally binding European security treaty, which Medvedev first proposed in June.

Martin Schulz, the head of the European Parliament's socialist group, said during a visit to Moscow on Wednesday that differences over the implementation of the Georgia-Russia peace accord mediated by French President Nicholas Sarkozy continued but that the economic crisis was probably more pressing.

"The Russians have not softened their hard-line position," Schulz said after talks with Federation Council speaker Sergei Mironov.

Schulz said this would be one of the issues that he would bring up in talks with Prime Minister Vladimir Putin this Friday.

In line with other European leaders, Merkel has strongly criticized the Russian invasion of Georgia. She condemned Moscow's ensuing recognition of independence for the breakaway regions Abkhazia and South Ossetia as "totally unacceptable."

Shortly before the war in South Ossetia began, Germany had actively tried to ease rising tensions in Georgia when Foreign Minister Frank-Walter Steinmeier promoted a peace plan for Abkhazia in July.

But the Foreign Ministry said Wednesday that Steinmeier's plan had been overtaken by events.

"That was interesting then, but now it is only the Sarkozy plan that is relevant," ministry spokesman Igor Lakin-Fralov said Wednesday.

Schulz, a leading member of Steinmeier's Social Democrats, claimed that the plan had, at the time, been ignored both by EU members and by Merkel's Christian Democratic Union, which forms a coalition with Steinmeier's party.

"Nobody gave a damn," he said.

Schulz also said the Petersburg talks would probably focus more on the global financial crisis.

He said that while officials had expressed confidence that the country would not be hit hard, their real feelings might be different: "They are not open about that, but you can feel that they are worried," he said.

Lothar de Maiziere, the German co-head of the Petersburg Dialogue, a joint discussion forum held parallel to the talks, said his organization had decided after the war to let this year's debate focus on the role of civil society in conflict resolution, rather than the "partnership for modernization" that Berlin had proposed earlier this year.

"We should not jeopardize the good relations achieved over the last years," de Maiziere, who served as East Germany's last prime minister in 1990, said via telephone from St. Petersburg.

He dismissed criticism that his forum, which he heads together with former Soviet leader Mikhail Gorbachev, was just a talking shop in the face of Moscow's aggressive foreign policies.

"Now we need dialogue more than ever," he said.

The Kremlin said Moscow would send 10 ministers to St. Petersburg, including Foreign Minister Sergei Lavrov, Finance Minister Alexei Kudrin and Interior Minister Rashid Nurgaliev.

Putin will not attend, his spokesman Alexander Smirnov said Wednesday.

The German Embassy said this was in accordance with past meetings. "They were always attended by the president and ministers but not prime ministers," an embassy spokesman said, speaking on customary condition of anonymity.

Yet Alexei Malashenko, an analyst with the Carnegie Center in Moscow, said Putin's absence might be a sign that talks are going to be complicated.

"He does not like to partake in discussions that promise to be difficult and where he cannot speak with the tone he likes to use," he said.