EU leaders back wide finance reforms
BERLIN (AP) — European leaders backed sweeping new regulations for financial markets and hedge funds at a summit Sunday in Berlin as politicians and nations scrambled to tame the global economic crisis.
German Chancellor Angela Merkel hosted heads of state and finance ministers from Europe’s largest economies to try to establish a common European position on economic reforms before an April 2 summit of the Group of 20 nations.
“All financial markets, products and participants including hedge funds and other private pools of capital which may pose a systematic risk must be subjected to appropriate oversight or regulation,” Mrs. Merkel said in a statement released on behalf of the summit members, following the talks.
Top officials from Britain, France, Germany, Italy, Luxembourg, Spain, the Netherlands and Czech Republic agreed on seven key points during their one-day meeting, the statement said.
“A clear message and concrete action are necessary to engender new confidence in the markets and to put the world back on a path toward more growth and employment,” Mrs. Merkel said.
But the call for blanket global regulation was sure to be resisted by the financial industry and may not be entirely welcomed by other members of the G-20, which in addition to European nations includes the United States, China, Japan and developing nations such as India and Brazil.
Mrs. Merkel urged stricter market regulation two years ago but met with strong resistance from the United States and Britain.
European leaders this time backed Mrs. Merkel’s call for a “charter of sustainable economic activity” to reduce economic imbalances and stabilize financial markets.
The charter would subject all financial market activities around the globe to regulation, including credit rating agencies. Mrs. Merkel said the charter would be “based on market forces but prevent excess and ultimately lead to the establishment of a global governance structure.”
The leaders also agreed to strengthen the International Monetary Fund and to support doubling its funds. British Prime Minister Gordon Brown said that international institutions need some $500 billion and called for a “global New Deal” to be adopted to help right the world economy.
“The IMF’s resources must be doubled to enable it to help its members swiftly and flexibly when they experience difficulties with respect to their balance of payments,” Mrs. Merkel said.
Other key points included adopting a “sanctions mechanism” to safeguard against tax havens and urging banks to keep larger reserves of capital.
“A new system of regulation without sanctions would not have any meaning,” French President Nicolas Sarkozy said. He said European countries jointly were drawing up a list of tax havens and the sanctions they might face for continuing what he called reckless financial activity.
Mrs. 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,” Mrs. Merkel said, swiftly adding that “this is not an accusation.”