In These New Times

A new paradigm for a post-imperial world

France, Germany say regulation priority for G20

Posted by smeddum on March 23, 2009


Tue Mar 17


* Sarkozy, Merkel want ‘new financial architecture’


* All hedge funds should be registered, regulated


* EU should look at sanctions on non-transparent states




(Adds Merkel-Balkenende article)


By Madeline Chambers and Paul Carrel


BERLIN, March 17 (Reuters) – France and Germany said the top priority for an April G20 summit should be to agree new rules for the global financial system, in the latest signal to Washington that they oppose its push for new stimulus measures.


In a joint letter to the EU presidency released on Tuesday, the two countries’ leaders said the EU should propose all hedge funds and other private investment firms that could pose a systemic risk should be registered, regulated and supervised.


“The top priority is the putting in place of a new global financial architecture,” French President Nicolas Sarkozy and German Chancellor Angela Merkel wrote in the letter, released in Berlin.


That the two leaders felt the need to write to Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, to emphasise their position suggests they may be worried about rifts at the April 2 summit of leaders of the G20.


While the United States wants fellow members of the club of rich and emerging economies to spend more, European nations want to focus on tighter regulation and rein in the unbridled capitalism they blame for the global crisis.


Finance ministers from the G20 last weekend put on a united front and vowed to rescue troubled emerging market economies. They also pledged to use their full fiscal and monetary firepower to combat the worst downturn since the 1930s.


In a separate article Merkel wrote with Dutch Prime Minister Jan-Peter Balkenende, the two leaders said the credibility of the G20 depended on the group fulfilling commitments made in Washington last November.


This included that “all financial markets, products and participants, without exception and regardless of where they are based, are subject to appropriate supervision or regulation,” they said in the article to be published in Frankfurter Allgemeine Zeitung daily on Wednesday.




Merkel and Sarkozy said in their letter that the EU should look at rules on executive pay and a sanctions mechanism for states that are uncooperative on regulation and transparency.


They said stimulus packages in the EU, which amount to more than 400 billion euros ($520 billion), or 3.3 percent of the bloc’s gross domestic product, showed Europe was leading the battle against the global downturn.


“We should send a strong message … of our faith in the scope and effectiveness of our own stimulus programmes,” said Sarkozy and Merkel.


Later, Eurogroup Chairman Jean-Claude Juncker went a step further, telling Germany’s Die Welt newspaper that euro zone countries did not need any new economic stimulus packages. The United States has committed $787 billion, or about 5.5 percent of GDP, in tax breaks and spending to fight the recession.


EU leaders meet on Thursday and Friday to agree on a common position for the G20 summit on ways to tackle the global economic downturn and prevent such crises in the future. [nLH421736]


Merkel and Sarkozy also said they welcomed signals from the EU that it would be ready to help any member that needed support, saying solidarity was a key principle for the bloc.


Speculation has grown that EU members might have to help those in a weaker financial situation, such as Ireland or Greece. One option mentioned has been the issuance of a joint euro zone bond, although there has been little support for this idea from countries like Germany. (Reporting by Paul Carrel and Madeline Chambers; Editing by Mark Trevelyan)

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