The heads of Europe's largest economies agreed yesterday on the need for greater regulation of financial markets and to double IMF funding to avoid a repeat of the global economic crisis.
The leaders of Britain, France, Germany, Italy, Spain and the Netherlands met in Berlin to hammer out a joint European stance for the Group of 20 meeting of developed and developing countries in London on April 2.
They agreed that 'all financial markets, products and participants - including hedge funds and other private pools of capital which may pose a systemic risk - must be subjected to appropriate oversight or regulation,' a summary of the meeting said.
The leaders proposed adding an extra $250 billion, double the current level of funding, to the International Monetary Fund (IMF) budget so it can work more effectively to prevent future financial crises.
British Prime Minister Gordon Brown said a reinforced IMF would be able to help central and eastern European countries swept up in a growing economic crisis as western banks withdraw credit.
'We are proposing today a $500 billion IMF fund that enables the IMF not only to deal with crises when they happen but to prevent crises,' Brown said. 'There is a need for a global New Deal so that the world economy can recover,' he added, referring to the plan to end the 1930s Great Depression.
French President Nicolas Sarkozy said participants in the April summit to be attended by US President Barack Obama, 'will bear a historical responsibility' and warned that concrete decisions had to be reached by then.
'By April 2, we have to succeed and we cannot accept that anything or anyone gets in the way of that summit... if we fail there will be no safety net,' Sarkozy said.
German Chancellor Angela Merkel said the Europeans were determined that a better-regulated financial system would emerge from the wreckage of the deepest financial crisis since World War II.
'It's not a case of talking up the situation but we want to send the message that we have a real opportunity to come out strengthened from this crisis,' she stressed. Merkel acknowledged that details of how hedge funds and complex financial products would be regulated still needed to be worked out.
The results of Sunday's meeting will be discussed by all 27 European Union members at summits in March.
But agreement might be hard to find, according to Czech Prime Minister Mirek Topolanek, whose country holds the rotating European Union presidency. He said Sunday's talks had exposed deep rifts.
The world's major economic powers are under pressure to build on pledges made at a G20 summit in Washington in November, where they formulated an action plan to fight 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.
