EU leaders weigh overhaul of Western financial foundations
BRUSSELS: Shaken by the financial meltdown and plunging markets, leaders of the world's economic powers said Wednesday that they favored an ambitious campaign to revamp the structures that have governed global finance for more than 60 years.
Officials from Britain, France and Germany, meeting before a summit meeting here of European Union leaders, said they approved of convening a conference in November or December aimed at revising the system put in place toward the end of the World War II.
In a statement issued Wednesday, the Group of 8, which also includes the United States, Japan, Canada, Italy and Russia, said it looked forward to a meeting "to adopt an agenda for reforms to meet the challenges of the 21st century."
Prime Minister Gordon Brown of Britain, regarded as the architect of a rescue package agreed upon Sunday by the euro-zone countries, said the world needed to alter the institutions that were created by the 1944 Bretton Woods conference and that have governed global finance. Brown also called for reviving the talks on global trade that broke down in July.
President George W. Bush has said he was in favor of a summit meeting on global financial institutions and wants to attend even if it takes place after the presidential election on Nov. 4, said European diplomats who asked not to be identified. The thinking was that the main economies would also hold a separate meeting with the U.S. president-elect if he were available before Inauguration Day on Jan. 20.
The EU meeting Wednesday was dominated by the fallout from the banking crisis and by fears of a recession. One consequence of that concern was a growing threat to Europe's ambitious plans to cut carbon dioxide emissions by 20 percent by 2020.
Poland led a rebellion by a group of nations threatening to block the conclusions of the meeting unless there was an agreement to abandon the December deadline for reaching an accord on a climate-change package. Eight East European nations want the EU to ease targets for greenhouse-gas cuts because of the economic crisis. Italy has also aired concerns, calling for an impact study of the effects on the real economy.
The meeting began with a bizarre feud between Prime Minister Donald Tusk of Poland and the country's euro-skeptic president, Lech Kaczynski. Denied a seat on Tusk's plane, Kaczynski chartered his own and crashed the meeting, provoking a diplomatic incident.
But the meeting saw consensus on the need to make financial changes. France, which holds the EU's rotating presidency, said it hoped that almost all 27 nations would endorse the principles agreed on by the euro-zone on Sunday.
Big nations rallied behind the notion of a "Bretton Woods II" conference. "I think there is a general agreement there should be an international leaders' meeting," Brown said before the start of the meeting. The agenda, he added, would be "far-reaching reform of the international financial system" and global trade talks.
Brown also called for changes at the International Monetary Fund and the World Bank, which he said were "built for the circumstances of 60 years ago." He urged the creation of an early warning system for the international economy and greater supervision of multinational companies.
He suggested that the IMF work more closely with the Financial Stability Forum, which was convened in April 1999 to promote the exchange of information and international co-operation in financial supervision and surveillance.
Prime Minister François Fillon of France, meanwhile, said, "The financial system is suffering a heart attack" and added that it would be "irresponsible" not to consider ambitious international changes "after the financial hurricane that has been hitting the world."
As the effort Sunday to coordinate European action in the financial crisis appeared to calm the markets for a time, José Manuel Barroso, the president of the European Commission, argued Wednesday that attention should shift to longer-term changes.
"We see light at the end of the tunnel but we are not there yet," he said. "Once we have put financial markets back on their feet, we must ensure that in the future they function properly for the benefit of citizens and businesses, rather than themselves."
The European Commission, meanwhile, has proposed changing accounting rules so assets do not have to be revalued so often, and plans to pass laws that will legalize the commitments made to guarantee bank deposits in Europe of up to €50,000, about $67,000, rising to €100,000 in time.
Proposals to govern executive pay and to regulate hedge funds are also being weighed.
But there was no indication Wednesday that Britain would drop its opposition to one important proposal from the European Commission - a so-called capital requirements directive. The proposal would require financial institutions to retain at least the equivalent of 5 percent of the capital value of an asset that they securitize.
Several EU officials, meanwhile, said they were worried that some countries might use the crisis to try to change long-established rules that block state aid to ailing companies, a central pillar of the EU's internal market.
