Europeans demand tough rules
LONDON, (Reuters) – France and Germany joined forces yesterday to demand world leaders deliver on pledges of tough financial market regulation at a crisis summit, with French President Nicolas Sarkozy saying “this is not negotiable”.
Keen to secure a confidence-boosting message for voters and frazzled financial markets as the world succumbs to the deepest downturn since the Great Depression, U.S. President Barack Obama said there were no substantive differences with Europe.
Washington wanted tougher regulation too, he told a news conference with Britain’s Gordon Brown, summit host.
It was not clear whether the flashpoint, which appeared to focus primarily on Sarkozy’s demands for blacklisting of tax havens, would be enough to sour the mood and compromise the outcome.
Several hundred demonstrators clashed with riot police and smashed bank windows in London’s finance centre ahead of the summit.
Police said one person died during the protest. More protests were planned for today, the main day of a summit involving the world’s biggest economies, developed and up-and-coming.
Global economic output will contract more in 2009 than any year since World War Two, says the International Monetary Fund, and IMF chief Dominique Strauss-Kahn says the “Great Recession” could cause 50 million job losses worldwide.
G20 leaders were preparing a major expansion in resources available through the IMF, possibly including a tripling of its war chest to $750 billion, G7 sources said.
Egypt’s finance minister issued a stark warning — people will die in the world’s poorest countries if rich nations push them aside in the scramble to escape the global economic crisis.
Developed countries are borrowing heavily on international markets to fire up their economies, meaning poorer countries are increasingly unable to do so, said Youssef Boutros-Ghali, who heads the IMF’s policy committee.
The G20 leaders hope around two trillion dollars governments are pumping into the economy in tax cuts, building projects and green investments will limit the depth and duration of recession and maybe create 20 million or so new jobs.
They were also looking to drum up more than $500 billion and maybe substantially more in funding the IMF can use to bail out economies which head into balance of payments troubles.
As the leaders dined with Queen Elizabeth at Buckingham Palace, officials were hammering away at details of what they would announce the following day.
Paris and Berlin fear the summit will fall short of the mark on regulation of tax havens, hedge funds and markets in general, and went in gunning for concrete announcements on that front.
“Any regulations we don’t agree here, won’t be agreed for the next five years,” Merkel told a joint news conference with her French counterpart. “The summit is not about horsetrading between regulation and economic growth programmes.”
“In the results, we want the principle of new regulation to be a major objective … This is not negotiable,” Sarkozy added. Obama, making his first official visit to Europe, said G20 nations were not going to agree on every point but brushed aside suggestions the summit would falter because countries were split over the importance of regulation versus new stimulus packages.
“The core notion that government has to take some steps to deal with a contracting global market place and that we should be promoting growth — that’s not in dispute,” Obama said.
“On the regulatory side, this notion that somehow there are those who are pushing for regulation and those who are resisting regulation is belied by the facts.”
The stakes are high, more so in the developing world.
Mexico’s central bank said it had asked to tap a $47 billion International Monetary Fund credit line, the latest Latin American country to seek help from the multilateral lender in an effort to navigate the global economic crisis.
World stock prices meanwhile built on a recent recovery, but worries over banks and growth continued to haunt markets in Europe and analysts said many investors remained on the sidelines, edgy over what message the summit would generate.
French President Sarkozy earlier threatened to disassociate himself from any “false compromises” at the summit, the second such meeting of world leaders to try to tackle the problems created by the downturn and credit crunch, which in turn began when the U.S. housing market collapsed over two years ago.
In a further sign of division, Japan criticised the German approach. Japanese Prime Minister Taro Aso was quoted as saying that Germany did not understand the importance of fiscal stimulus.
Brown stuck to an upbeat note, though. “We are within a few hours, I think, of agreeing a global plan for economic recovery and reform and I think the significance of this is that we are looking at every aspect,” he said.
