EU leaders to push financial regulation at G20 [fr] [de]
EU leaders yesterday (22 February) agreed to back oversight of the world's financial markets and products, including hedge funds, calling for a clampdown on tax havens as they forged a common position on global financial reform ahead of a summit of the G20 group of leading industrial powers in April.
Background
German Chancellor Angela Merkel invited the leaders of Britain, France, Italy, Spain, the Netherlands, Czech Republic and Luxembourg, as well as the president of the European Commission, national finance ministers and European central bankers, to prepare a common stance ahead of a full G20 meeting in London in April.
Since a first G20 summit on reforming the global financial architecture was held in Washington in November late last year, recessions in Europe and the United States have deepened, forcing governments to push through massive stimulus packages.
The Berlin meeting took place after a week of accusations of protectionism between European nations, with some of France's partners objecting to its plans to offer six billion euro in state loans to domestic carmakers.
"We're dealing with an extraordinary international crisis the likes of which we have not seen for decades, both as regards financial markets and the global economy. We believe that such an international crisis can only be solved jointly," said German Chancellor Angela Merkel.
According to a joint statement, leaders "underscored once again the conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk".
European leaders proposed that the International Monetary Fund (IMF) and the Financial Stability Forum (FSF) be charged with monitoring and promoting the implementation of the international recommendations.
The necessary details of the plan must be worked out and become a part of the action plan, the statement reads, underlining that a list of uncooperative jurisdictions and a toolbox of sanctions be devised as soon as possible.
The leaders also agreed to support the doubling of IMF funds. British Prime Minister Gordon Brown said international institutions need some $500 billion, and called for a "global New Deal" to be adopted to help right the world economy.
"If I compare it with the Washington action plan, we've made our position much clearer on the pursuit of tax havens, and also as far as the institutions, products and the specific locations go," Merkel said.
European leaders backed the German chancellor's call for a "charter of sustainable economic activity" to reduce economic imbalances and stabilise financial markets. They also backed the idea that credit rating agencies should be subject to mandatory registration and oversight. According to Merkel, "one of the mistakes of the past was that banks did not build up a buffer of their own capital and have not been able to react to the crisis".
Positions
"A new system of regulation without sanctions would not have any meaning," said French President Nicolas Sarkozy. He said European countries were jointly drawing up a list of tax havens and the sanctions they might face for continuing what he called "reckless financial activity".
German Chancellor Angela Merkel also warned the United States to avoid protectionism in its automobile market. "When I look at the restructuring plans of some American companies, there are a lot of state funds flowing into them," Merkel said, swiftly adding: "This is not an accusation."
Spanish Prime Minister Jose Luis Rodriguez Zapatero said the focus of the London summit was clear. "In Washington, the G20 established the principles of the new international financial system. In London in April, we have to move towards action and we are here in Berlin to renew this commitment," he said.