* Says G20 must correct developments that lead to imbalances

* Calls for strengthening of market economy processes

* Says G7 recognises German contribution to global growth

* Warns of fallback into 'planned economy thinking'

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GYEONGJU, South Korea, Oct 22 (Reuters) - Germany's economy Minister resisted a call from the United States on Friday for direct action in tackling foreign exchange and trade imbalances, warning of the risks of succumbing to "planned economy" thinking.

Rainer Bruederle, who is attended a meeting of G20 finance ministers in South Korea in place of Germany's hospitalised finance minister, said the Group of 20 leading economic powers must correct the errors that have led to imbalances but must rely on market processes to do so.

"We need a strengthening of the market economy processes," Bruederle told reporters on the sidelines of the G20 meeting, warning against "a fallback into planned economy thinking".

"We must correct undesirable economic developments that lead to imbalances," he added.

Earlier, U.S. Treasury Secretary Timothy Geithner, in a letter to finance leaders seen by Reuters, called for more proactive moves by both developed and developing countries.

"Countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth," he said. [ID:nTOE69L056]

Geithner's overtures have already been rejected by countries as diverse as India and Japan and Bruederle's comments further dent prospects of the G20 agreeing a universal deal that would address global economic imbalances and tackle attempts by many emerging economies and others to weaken their currencies.

Bruederle said finance ministers from the Group of Seven countries recognised at an earlier meeting on Friday that Germany had made an important contribution to the recovery of the global economy.

The G20 needed to tackle the root causes of the world's economic troubles, he added.

"We need more balance, more stability in the global economic growth process," Bruederle said, adding that the International Monetary Fund should take a stronger monitoring role.

(Reporting by Gernot Heller, writing by Paul Carrel; Editing by John Stonestreet)