European leaders meet over financial crisisMonday 23 February 2009 11.06
The heads of Europe's largest economies have agreed on the need for greater regulation of financial markets and of products such as hedge funds.
The leaders of Britain, France, Germany, Italy, Spain and the Netherlands met in Berlin to hammer out a joint European position for the G20 meeting in London on 2 April.
A German official said they had agreed that ‘no financial market, no financial product, no financial market actor should be without regulation or oversight’.
And in what appeared to be a major shift in the position of countries such as Britain, the official said all the leaders had agreed a tough stance on hedge funds, the highly speculative and lightly regulated products that have been blamed for fuelling instability in financial markets.
London had previously resisted greater regulation of such funds, which supporters say benefit the economy by bearing risks that others are unwilling to take.
The world's major economic powers are under pressure to build on pledges made at the G20 summit in Washington in November, where they formulated an action plan for fighting the crisis.
But the global recession has worsened since then, prompting governments to push through massive economic stimulus packages and overshadowing efforts to reform the global financial system.
The national stimulus plans have sparked fears of protectionism which could hinder efforts to present a united European front.
The Berlin talks came at the end of a week in which the economic crisis focused on central and eastern Europe, raising fears over potential fallout among highly exposed banks in western Europe.
Ahead of the meeting, French President Nicolas Sarkozy stressed he would not accept ‘a weak compromise, a cheap fix’ in establishing the European position at the meeting hosted by German Chancellor Angela Merkel.
Chancellor Merkel too turned up the heat ahead of the meeting, calling for regulations and oversight of financial markets to be reinforced.